5 
6 
1 

5 
1 
1 


&1^ 


Memorandum 


ON  THE 


Industrial  Situation 
After  the  War 


((jArton  Foundation) 


REPRINTED   BY 

INDUSTRIAL  RELATIONS  DIVISION 
UNITED  STATES  SHIPPING  BOARD 
EMERGENCY   FLEET   CORPORATION 

PHILADELPHIA,   PA. 


•m  21  193t 
'AUG  1  ^  ^<^^«^ 


HC 
G19 


Garton 


.'lo-hinn,  "London 


Southern  Branch 
of  the 

University  of  California 

Los  Angeles 

Form  L-l 


\ 


Memorandum 


ON  THE 


Industrial  Situation 
After  the  War 


(Garton  Foundation) 


per 


'J' 


REPRINTED   BY 

INDUSTRIAL  RELATIONS  DIVISION 
UNITED  STATES  SHIPPING  BOARD 
EMERGENCY    FLEET    CORPORATION 

,    .  PHILADELPHIA,   PA. 

t       J    *    t    '     '       '       '  I         ,',  ' 

>U*"  11  II  'i*-* 


bu?50 


&\9 


PREFACE 


I 


This  Memorandum  is  the  work  of  a  group  of  men  who  came  together, 
at  the  instance  of  the  Garton  Foundation,  for  the  purpose  of  discussing  the 
industrial  situation  in  this  country  at  the  close  of  the  present  war.  The 
group  included  men  of  very  varied  views,  in  touch  with  both  the  Capitalist 
and  Employing  Classes  and  Organised  Labour,  as  well  as  with  financial, 
economic  and  administrative  circles.  As  a  result  of  their  inquiries  and  of 
correspondence  and  discussion  with  representatives  of  all  parties  to  indus- 
try, they  became  convinced  that  the  return  from  war  to  x>eace  conditions 
woidd  inevitably  involve  great  difficulties,  which  might  result,  if  not-  care- 
fully and  skilfully  handled,  in  a  grave  outbreak  of  industrial  disorder. 

In  the  endeavour  to  find  a  solution  of  these  difficulties,  they  were  led  to 
analyse  the  more  permanent  causes  of  industrial  friction  and  inefficiency, 
and  to  seek  the  means  by  which  these  causes  might  be  removed  or  their 
action  circumscribed.  It  is  their  belief  that  these  means  can  be  foimd  and 
that  an  emergency  which  threatened  all  classes  of  the  community  with 
serious  loss  and  hardship  may  be  used  as  an  opportunity  for  placing  the 
whole  industrial  life  of  the  counti*y  on  a  sovmder  basis. 

In  that  belief,  this  Memorandum  was  compiled.  It  has  been  the  object 
of  its  authors  to  keep  always  in  mind  the  human  as  well  as  the  economic 
side  of  industry.  They  are  conscious  that  this  country  has  suffered  much 
in  the  past  from  the  habit  of  sectional  thinking,  which  divides  our  national 
activities  into  water-tight  compartments  and  regards  the  nation  itself  as 
composed  of  detached  or  hostile  classes.  The  keener  consciousness  of  cor- 
porate life,  which  is  perhaps  the  most  beneficial  result  of  the  present 
struggle,  has  created  an  atmosphere  in  which  it  is  easier  to  conceive  of 
industry  as  an  inseparable  part  of  the  life  of  the  nation;  and  of  those  con- 
cerned in  industry,  whether  as  employers  or  employed,  as  co-workers  in  the 
task  of  building  up  a  future  worthy  of  the  sacrifices  which  have  been  made 
during  the  war. 

The  Memorandum  has  already  been  privately  circulated,  to  a  con- 
siderable extent,  among  employers  of  labour,  leaders  of  working  class 
opinion,  and  those  who  have  taken  a  prominent  place  in  the  discussion  of 
economic  and  social  questions.  A  large  number  of  criticisms  and  sugges- 
tions have  been  received,  which  have  been  collated,  carefully  examined,  and, 
in  many  cases,  incorporated  in  the  Memorandum.  The  general  tone  of  its 
reception  on  all  sides  has  been  such  as  to  encourage  its  publication  as  a  con- 
tribution to  public  discussion  of  what  is  ])erhaps  the  most  urgent  question, 
after  the  immediate  conduct  of  the  war.  witli  which  the  country  is  con- 
fronted to-day. 

3 


It  is  evident  that  in  order  to  avert  the  threatened  dangers  and  to  take 
full  advantage  of  the  opportunity  afforded  by  the  circumstances  of  the  war, 
with  its  upheaval  of  existing  conditions  and  its  challenge  to  accepted  ideas, 
study  of  the  questions  involved  must  begin  while  the  war  is  still  with  us. 
Many  Government  Committees  and  many  non-official  bodies  are,  in  fact, 
already  at  work  upon  various  aspects  of  the  problem.  There  is,  however, 
a  danger  that  the  number  and  complexity  of  the  questions  involved,  and 
especially  of  those  relating  to  the  actual  period  of  demobilisation,  may 
divert  attention  from  the  broader  aspects  of  industrial  reconstruction  and 
the  fundamental  principles  of  industrial  policy.  The  authors  of  the  Mem- 
orandum have  endeavoured  throughout  to  keep  their  eyes  fixed  upon  the 
fundamental  facts  of  industrial  life  and  the  spirit  by  which  it  should  be 
animated,  treating  the  more  detailed  problems  of  demobilisation  and  recon- 
struction with  a  view  to  showing  them  in  their  right  proportion  and  relation 
to  the  main  issues. 

The  Trustees  of  the  Garton  Foundation  (The  Et.  Hon.  A.  J.  Balfour, 
M.P.;  The  Et.  Hon.  Viscount  Esher,  G.C.B.,  and  Sir  Eichard  Garton)  have 
permitted  the  devotion  of  its  staff  and  resources  to  this  work  in  the  belief 
that  sincere  and  intelligent  inquiry  with  regard  to  these  questions  cannot 
fail  to  be  of  national  service.  While  they  do  not  in  any  way  identify  them- 
selves with  the  conclusions  arrived  at  by  its  authors,  they  believe  that 
nothing  but  good  can  come  of  submitting  them  to  the  test  of  public  discus- 
sion. In  that  belief  they  have  sanctioned  its  publication  in  its  present 
form. 


SYNOPSIS* 

A.— THE     INDUSTRIAL    SITUATION    TODAY     (1-12) 

Grave  ai^prehensious  entertained  by  Kniployers  and  Employed.      (1) 

The  appearance  of  present  prosperity  deceptive.      (2-4~) 

Industrial  unrest  oftly  suspended.      (5-7) 

The  dangers  of  sectional  thinki    r.      (8-11) 

Relation  of  industrial  to  social    ,  ,h1  {Kjlitical  problems.      (12) 

B.— THE    EFFECTS   OF    THE    wUr    ON    THE    INDUSTRIAL    SITUATION 
(13-63) 

I. — Employment:    (15-25) 

(i)     The  Supply  of  Labour.      (16-19) 

(a)    Demobilisation.      (10-17) 

(6)    Diminution  of  Government  Orders.      (18) 

(c)     Stopgap  and  emergency  workers.      (19) 
(ii)    The  Demand  for  Labour.      (20-23) 

(a)  Repair  and  reconst'-uction  demand.      (21) 

(b)  Revival  of  private  demand.      (22) 

(c)  Revival  of  foreign  trade.      (23) 

Prospects  of  Employment:  No  "shortage  of  work"  or  'surplus  of  labour," 
but  a  good  deal  of  unemployment  due  to  difficulties  of  re-adjustment.      (24-25) 

II.— Earnings:    (26-39) 

The  national  income  cannot  exceed  the  sum  of  goods  and  services  produced 

(or  received  from  without).      (26) 
Causes  tending   to  lessen  Produetinn:      (27-33) 

(a)  Men  killed  and  incapacitated.      (27) 

(b)  Emigration.      (28) 

Losses  by  death  or  emigration  will  not  be  wholly  compensated  by 
reduction  in  number  of  consumers,  or  bv  new  workers. 
( 2!)-30 ) 

(c)  Deterioration  of  National   Plant.      (31) 
id)     Effects  of  Overwork.      (32) 

(e)     Suspension  of  Industrial  Education.      (33) 
Causes  tending  to  inerea^e  Production:     (34-37) 

Many  people  may  work  liarder  aiul  former  non-producers  may  con- 
tinue working.      (34) 
Conversion  of  new  munition  ])lant.      (S.")) 
Better  organisation  of  production.      (36) 
Reduction  of  Income  from  Abroad.      (38) 

Net  Effect  of  the  War  ox  Earnixcs:  Unless  a  special  effort  is  made  the 
national  income  is  likely  to  be  lower  tlian  l)efore  the  war.  and  the  likcliliood  of 
quarrelling  over  its  apportionment  will  lie  increasi^l.      (39) 

III. — The  Distribution  of  Earnings:    (40-46) 

New  factors  afTectin'g  questions  of  distribution.      (40) 
(a)    High    Prices.      (41) 
(6)    High  War  Wages.      (42-43) 

Weekh'  earnings  and  rates  per  hour.      (42) 

EfTect  of  Prices  on  Real  A\'ages.      ( 42 ) 

EflVct  of  State  allowances.      (43) 

(c)  War    Loans    and    Taxation:     EfTect    on    distribution    of    national 

income.      (44) 

(d)  D^arness  of  Capital.      (4.5) 

*The  numbers  in  brackets  relate  to  paragraphs,  not  to  pages. 


Prospects  ^^•ITH  regard  to  the  Distribution  of  Earnings:  The  operation 
of  the  above  factors  will  be  unfavourable  to  industry,  and  [larticularly  to  labour. 
Unless  output  can  be  expanded,  contlicts  between  employers  and  employed  are 
probable.      (46) 

IV.— Capital   and   Credit:    (47) 

Fixed  Capital  will  have  depreciated;  tluid  capital  will  be  scarce  and  dear; 
we  may  be  threatened  with  a  partial  collapse  of  credit  when  embargoes 
are  removed  and  financial  obligations  have  to  be  met. 

v.— Spirit  and   Temper:    (48-63) 

The  difficulties  of  the  situation  may  be  complicated  by  an  ugly  temper  arising 
from  several  causes    (48-4i))  X 

(a)  Economic  Discontent.      (50-54) 

Low  real  wages  and  unemjiloyment.      (50-51) 
Cessation  of  Separation  Allowances.      (52) 

The  war  has  strengthened  the  demand  for  better  conditions.      (53) 
Capital  and  Management  will  be  hit  by  restricted  output,  increased 
cost  of  production  and  heavy  taxation.      (54) 

(b)  Class-Suspicion.      (55) 

Removal  of  Trades  Union   safeguards;   war-time  strikes;   fear  that 
soldiers  may  be  used  for  strike-breaking  or  as  "black-leg"  labour. 

(c)  Psychological  Reactions:       (56-62) 

Reaction  following  on  war-time  efforts.      (57) 
Resentment  against  burdens  o'f  war.      (58-60) 
"^Yrecker  "  doctrines.      (61) 
Reactionaries   in  Employing  Class.      (62) 

Prospects  as  to  Spirit  and  Temper:  If  not  checked,  an  ugly  spirit  and 
temper  may  easily  deveiop  and  render  a  satisfactory  solution  of  industrial  prob- 
lems impossilile.      (63) 

C— THE    PROBLEM    AND    SOME    REMEDIES    (64-132) 

I.— The  Problem:    (64-78) 

(i)    The  Emergency  Problem:      [65-70) 

Every  class  has  much  to  lose  by  industrial  conflict.  The  event  is 
uncertain  and  the  prize  of  victory  will  j^erish  in  the  struggle. 

(ii)    The  Constructive  Problem :       (71-72) 

The  Constructive  Problem  is  concerned  both  with  meeting  the  more 
lasting  effects  of  the  war,  and  with  the  permanent  difficulties 
of  our  industrial  life.      (71) 

The   great   opportunity.      (72) 

If  the  measures  by  which  the  emergency  is  handled  can  be  such  as 
will  make  for  permanent  reconstruction,  so  much  the  better. 
(73) 

Both  the  Emergency  and  the  Constructive  Problem  are  dual  in  their 
nature.  The  direct  effects  of  the  war  can  be  dealt  with  by 
specific  remedial  measures ;  the  underlying  problem  of  indus- 
trial policy  and  relations  requires  broader  and  more  far- 
reaching  treatment.      (74-78) 

II. — Emergency   Measures:    (79-93) 

(i)    Demobilisation:       (79-87) 

(a)  The  finding  of  jobs.      (79-80) 

(6)  The  assuring  of  decent  wages.      (81-83) 

(c)  Settling  men  on  the  land.      (84) 

id)  Teaching  men  trades.      (85)  • 

(e)  The  new  workshops.      (86-87) 

6 


C— THE   PROBLEM   AND  SOME   REMEDI ES— Continued. 

(ii)    The  Exodus  from  the  War  Industries:      (88-92) 
The  number  afTectcd.      (88) 
Transferred  workers.      (89) 
New  workers.      ( 90 ) 
Boy  and  girl  labour.      (91) 
The  remedies.      (92) 

(iii)    Industrial   Friction:      (93) 

\Muitever  remedial  measures  may  be  adopted,  friction  can  only  be 
avoided  by  agreement  between  Capital,  Management  and 
Labour  as  to  the  future  organisation  of  industry. 

III. — Constructive  Measures:    (94-132) 

(i)    I.NULSTKIAL   Ekhcie.ncy:      (94-112) 

(a)  Physical  efliciency.      (95) 

(b)  ^Icntal  and  manual  efficiency — The  Primary  Schools.      (9fi) 

(c)  Continuation  education.      (97) 

(d)  Labour-saving  machinery.      (98-102) 

(e)  Works  organisation.      (103-105) 
if)    Labour  Legislation.      (100) 

ig)    Reform  of  the  Patent  Laws.      (107) 
{h)    The  Encouragement  of  Research.      (108) 
(i)    Improved  metliods  of  distribution.      (109) 

{Ic)    Banking   and   credit   facilities.      (110-111.)      The   Danger   of   Panic 
Economy.      (112) 

(ii)   Increased  Saving:      (113-117) 

Capital  for  the  repair  and  improvement  of  the  national  plant  and 
tiie  reconstruction  of  devastated  areas  can  only  be  furnished  by 
people    producing    nuich.    spending    little    on    consumption    of 
goods,  and  saving  the  balance.      (113) 
Need  for  education  in  the  principles  of  economy.      (114) 
The  distribution  of  national  wealth  and  its  effect  upon  saving.    (115) 
Working-class  saving  and  tlie  dangers  of  injudicious  "thrift."    (116) 
The  relation  of  saving  to  demand.      (117) 

(iii)   Assured  Markets:      (118-128) 

(o)    Home  Demand:      (119-122) 

The  methods  of  capital  renewal.      (119) 

The  effect  of  protective  tariffs.      (120-122) 
(6)    Empire  .Markets:      (123) 

The  (juestion  of  Imperial  Fiscal  Union. 

(c)  Foreign  Markets:      (124-126) 

The    organfsation    of    selling;    consular    service;    adaptability    and 

languages;  Ministry  of  Commerce.      (124) 
Prestige.      (125) 
The  connection  between  home  and  foreign  markets.      (126) 

(d)  Allied  Zollvcrein  and  trade  war.      (127-128) 

(iv)   LAND:      (129-130) 

The  question  of  land  ownership  and  economic  rent. 

(v)     AGRICULTURAL:        (131) 

The  need  for  better  organisation  and  education. 
The  above  remedial  measures,  though   important,  will  not   solve  the   funda- 
mental question  of  Industrial  Unrest.      (132) 

D.— THE    FUNDAMENTAL   PROBLEM    (133-180) 

To  understand  tiic  fundamental  prol)lem  we  must  examine  the  essentials  of 

industrial  welfare.      (133) 
The  foundation  of  industrial   welfare  is  production:   its  volume,  its  quality 

and  the  conditions  of  work.     (134) 
Increased   saving,   for  the  renewal   of  capital   and   plant   is   an   essential   of 

increased  output.      (135) 


D.— THE  FUNDAMENTAL  PROBLEM— Continued. 

Increased  Production,  Increased  Saving,  Increased    Confidence 

are  the  keys  to  the  whole  problem.     (136) 
Limitation  of  Production: 

By  Employers.      (137-138) 

By  Labour.      (139-140) 

Why  and  how  restrictions  should  be  removed.      ( 141 ) 

The  Fundamental  Question — The  Relation  Between  Employ- 
ers AND  Employed.     (142) 

The    interests    of    Employers    and    Employed    are    concurrent    as 

regards    production    and   only   partly   antagonistic   as    regards 

distribution.      (143-144) 
The  question  of  status.      (145-147) 
The  grievances  of  Employers.      (148-149) 
So  long  as  the  fundamental  interests  of  Employers  and  Employed 

are  believed  to  be  purely  antagonistic,  production  and  saving 

will  be  hampered.     '(150-152) 

The  four  guiding  principles.      (153) 

{a)    The  necessity  of  increased  efficiency  in  production. 

(b)  Increased  efficiency  must  be  sought  for  in  better  methods  and  organi- 
sation, and  in  a  new  attitude  towards  Industry. 

(c)  These    reforms    can    only   be   accomplished    by   the    co-operation    of 
Labour,  Management  and  Capital. 

{d)    In  order  to  secure  this  co-operation,  Labour  must  have  a  voice  in 
matters  relating  to  its  special  interests. 
In  dealing  with  an  immediate  problem  we  must  work  with  the  materials  at 
hand.     Gradual   progress   achieved  by   co-operation  is   better   and   more 
certain  than  revolutionary  methods.      (154) 

Demands  made  on  all  classes  and  the  necessity  of  meeting  them. 

(155-1.>8) 
The  State  cannot  move  in  advance  of  public  opinion.      (159) 

The  Functions  of  Capital,  Management  and  Labour.     (160) 

Inter-relation    of    these    functions    and    consequent    common    interests. 

(161-162) 
Why  the  possibilities  of  co-operation  are  not  recognised.     The  causes  of 

conflict.      (163-169) 
The  Outlines  of  a  Settlement.     (170-180) 

Appendix  A. — A  suggested  Experiment. 

Appendix  B. — Works  Lectures. 


A. — The  Industrial  Situation  Today 

1.  The  probable  course  of  Trade  and  Industry  after  the  war  is  already 
engaging  the  attention  of  numerous  official  and  non-official  bodies.  Some 
of  these  bodies  are  concerned  with  the  difficulties  of  demobilisation  and  a 
return  from  war  to  peace  activities ;  others  with  the  possibilities  of  develop- 
ment and  expansion  which  the  changed  political  and  economic  conditions 
appear  to  hold  out  to  us.  Both  aspects  of  the  problem  have  attracted  a 
considerable  amount  of  attention ;  but  it  is  doubtful  whether  there  is  as  yet 
any  widespread  public  recognition  either  of  the  dangers  by  which  we  shall 
be  threatened,  or  of  the  greatness  of  the  opportunity  which  will  be  presented 
to  us.  Among  those  who  are  closely  connected  with  Industry,  whether  as 
Employers  or  as  leaders  of  Organised  Labour,  there  are  many  who  regard 
the  future  with  grave  apprehension.  Both  in  the  difficulties  inseparable 
from  readjustment  and  in  the  more  permanent  effects  of  the  war  upon  our 
economic  life,  they  foresee  the  occasion  of  a  renewed  outbreak  of  industrial 
friction  which  would  not  only  obstruct  our  commercial  progress,  but 
seriously  cripple  our  power  of  recovery. 

2.  The  seeming  prosi^erity  of  the  country  during  the  war  has  obscured 
the  realities  of  the  situation.  Because  the  war  has  not  given  rise  to  unem- 
ployment and  the  financial  crisis  which  followed  on  its  outbreak  was  suc- 
cessfully tided  over,  many  observers  ignore  the  industrial  dislocation  which 
has  taken  place.  Because  there  has  been  a  general  cessation  of  disputes 
between  Labour  and  Capital,  which  has  enabled  us  to  concentrate  our 
energies  upon  the  vigorous  prosecution  of  the  war,  they  imagine  that  the 
problem  of  industrial  unrest  has  in  some  way  been  solved. 

3.  These  conclusions  are  altogether  contrary  to  the  facts  of  the  case. 
The  prosperity  of  the  present  is  artificial  and  transient.  It  is  due  in  part 
to  strenuous  exertion  which  cannot  be  continued  indefinitely;  in  part  to 
sacrifices  which  go  unrealised  because  they  are  not  proclaimed;  in  part  to 
the  depletion  of  accumulated  stocks;  in  part  to  the  suspension  of  expendi- 
ture on  national  plant  which,  if  continued,  would  end  in  dilapidation;  in 
part  to  the  temporary  absorption  into  industry  of  people  who  will  not  con- 
tinue to  be  producers  after  the  war;  in  part  to  borrowing  and  recalling 
money  from  abroad.  It  resembles  in  large  measure  the  lavishness  of  the 
spendthrift  which  leads  to  bankruptcy.  The  absence  of  unemployment  is 
due,  not  to  thriving  trade,  but  to  the  withdrawal  of  several  million  men 
from  the  labour  market,  the  inflation  of  the  currency,  and  the  concentration 
of  purchasing  power  in  the  hands  of  the  State,  which  has  not  to  study  the 
absorptive  power  of  commercial  nxiirkets  for  the  disposal  of  its  purchases, 
but  uses  them  to  destruction  as  fast  as  they  are  produced.  It  is  not  till 
these  stimulants  are  removed  and  we  are  left  once  more  to  the  operation  of 


the  ordinary  laws  of  supply  and  demand,  complicated  by  the  difficulties  of 
readjustment  to  normal  conditions,  that  the  real  situation  ci^eated  by  the 
war  will  become  obvious. 

4.  It  may  be  said  that  the  success  with  which  our  national  organisa- 
tion and  activities  were  adapted  to  the  circumstances  of  the  war  gives  a 
fair  promise  of  similar  success  in  the  readjustments  necessitated  by  peace, 
But  the  problems  presented  by  a  temporary  crisis  in  which  economic  consid- 
ei'ations  sink  into  a  secondary  place  and  the  strongest  possible  appeal  is 
mlade  to  the  spirit  of  self-sacrifice  in  all  classes,  afford  no  real  parallel  to 
those  presented  by  a  return  to  normal  conditions  after  a  long  period  of  dis- 
location. The  factors  mentioned  in  the  preceding  paragraph,  while  they 
have  eased  the  situation  during  the  war,  will  become  a  source  of  weakness 
as  soon  as  peace  is  signed.  In  some  cases,  such  as  the  withdrawal  of  men 
from  the  labour  market,  their  operation  will  be  exactly  reversed.  In  others, 
such  as  the  depletion  of  stocks  and  the  suspension  of  expenditure  on 
national  plant,  immediate  relief  has  been  purchased  by  mortgaging  the 
future.  The  war  has,  in  these  two  regards,  been  paid  for  by  drafts  upon 
the  prospective  wealth  which  will  have  to  be  met  at  a  time  when  the  enthusi- 
asm which  sustains  a  nation  during  war  has  given  place  to  the  reaction  that 
usually  follows  a  period  of  tension.  The  rapid  recovery  of  Industry  from 
the  shock  of  war  affords  no  ground  for  dismissing  lightly  the  difficulties 
inherent  in  a  return  to  peace  conditions.  On  the  contrary,  an  examination 
of  the  causes  of  that  recovery  reveals  additional  grounds  for  viewing  those 
difficulties  with  concern.  The  prospect  is  a  grave  one  and  it  is  likely  to  be 
further  complicated  by  the  spirit  in  which  it  is  regarded  by  both  parties  to 
Industry. 

a 

5.  Even  were  the  present  relations  of  Employers  and  Employed 
entirely  harmonious,  we  could  not  feel  complete  confidence  in  the  contin- 
uance of  that  harmony  after  the  war.  But  such  is  not  the  case.  Even 
under  the  stress  of  war  there  is  ill-feeling,  suspicion,  and  recrimination. 
Charges  have  been  made  against  each  side  of  placing  personal  and  class 
interests  before  national  welfare,  and  of  using  the  national  emergency  to 
snatch  present  gains  and  to  strengthen  its  strategical  position  for  the 
resumption  of  industrial  hositilities.  Employers  have  pointed  to  extor- 
tionate wage  demands,  broken  time,  slackness,  insubordination,  and  sullen 
resistance  to  temporaiy  changes,  the  necessity  for  which  has  been  openly 
acknowledged.  The  workers  have  pointed  to  war  profits,  to  the  virtual 
enslavement  of  labour  by  the  misuse  of  powers  conferred  by  the  State,  to 
attempts  to  undermine  and  weaken  the  Unions  and  so  to  establish  an 
ascendency  which  may  be  maintained  after  the  war.  They  lay  stress,  also, 
on  the  increased  cost  of  living,  which  they  attribute  in  the  main  to  the 
deliberate  action  of  manufacturers  and  traders,  more  studious  of  their  own 
than  of  the  national  advantage.  The  closing  of  the  ordinary  channels  for 
the  ventilation  of  grievances  has  served  only  to  intensify  the  bitterness  of 
such  feelings. 

10 


6.  There  is  a  prevalejit  belief  that  the  "brotherhood  of  the  trenches" 
and  workshops,  the  spirit  of  co-operation  and  self-sacrifice  which  has  made 
possible  our  efforts  in  the  war,  will  remain  as  a  permanent  factor  in  our 
national  life.  A  great  deal  has  been  said  of  the  effect  of  discipline  upon 
the  men  who  have  served  at  the  front,  and  it  is  widely  assumed  that  on 
their  return  they  will  be  more  amenable  to  management  and  less  responsive 
to  agitation.  Those  who  argue  thus  do  so  mostly  on  general  principles  and 
probabilities.  But  it  is  no  use  arguing  that  certain  conditions  oxight  to 
produce  certain  effects  if  the  facts  show  that  they  do  not.  There  is  evidence 
that  many  of  the  m.en  who  return  from  the  trenches  to  the  great  munition 
and  shipbuilding  centres  are,  within  a  few  weeks  to  their  return,  amongst 
those  who  exhibit  most  actively  their  discontent  with  present  conditions. 
Among  those  who  have  fought  in  Flanders  or  who  have  been  employed  in 
making  shells  at  home,  there  are  many  who  look  forward  to  a  great  social 
upheaval  following  the  war.  To  some  this  may  be  distressing  and  almost 
incredible.     The  facts  remain,  and  the  facts  must  be  faced. 

7.  So  long  as  the  country  is  actually  at  war,  this  spirit  is  likely  to  be 
held  in  check  both  by  the  abnormal  conditions  of  State  control  and  by  the 
patriotism  of  the  mass  of  the  people.  So  long  as  the  peril  from  without 
remains  the  supreme  factor,  we  may  look  to  the  workmen  to  forego  his 
most  cherished  safeguards  and  to  employers  and  the  propertied  classes  to 
bear  patiently  restriction  of  profits  and  an  unparalleled  burden  of  taxation. 
But  we  have  had  signs  already,  in  the  war-time  strikes,  in  the  denunciations 
of  profiteering,  and  in  the  evidence  of  a  great  body  of  suppressed  resent- 
ment on  both  sides,  which  does  not  as  yet  come  to  the  surface,  that  the 
industrial  peace  is  only  a  truce.  It  would  be  a  mistake  to  assume  that  this 
truce  will  sunave  the  immediate  pressure  of  foreign  war  which  brought 
it  about. 

8.  The  truth  is  that  the  war  has  effected  a  temporary  alliance  between 
different  parties  and  different  classes  similar  to  that  frequently  effected 
between  States.  Just  as  nations  formerly  bitterly  opposed  have  been  united 
in  face  of  a  common  peril,  so  Liberal  and  Tory,  Labour  and  Capital,  have 
united  to-day  for  a  specific  purpose.  When  that  purpose  has  been  achieved 
the  alliance  will  break  up,  unless  more  permanent  ties  of  interest  and  sym- 
pathy can  be  created. 

9.  For  aid  in  the  creation  of  such  ties  we  can,  indeed,  look  to  that 
quickened  sense  of  corporate  responsibility  which  the  war  has  developed. 
But  for  this  purpose  it  will  not  sufiice  to  rely  upon  any  vague  sentiment  of 
goodwill.  We  have  for  so  long  been  accustomed  to  consider  the  community 
as  divided  into  classes  having  neither  common  aims  nor  common  interests, 
and  to  regard  the  operations  of  industry  as  something  apart  from  the  moral 
and  intellectual  life  of  the  nation  or  of  the  individual,  that  it  will  not  be 
easy  to  carry  into  the  industrial  sphere  that  spirit  of  united  effort  and  high 
endeavour  which  has  been  awakened  by  the  great  conflict.  The  workman's 
sense  of  loyalty  in  times  of  peace  has  been  excited  by  his  Union  or  by  his 
class  rather  than  by  any  conception  of  natioiuil   unity.     The  employer's 

11 


business  patriotism  has  stopped  short  at  the  conception  of  successful  resist- 
ance to  foreign  competition.  By  both  alike  the  internal  organisation  of 
industry  has  been  considered  as  a  purely  domestic  affair,  a  business  bargain 
to  be  arrived  at  by  a  compromise  between  competing  interests.  The  events 
of  the  past  two  years  have  emphasised  both  the  advantage  of  co-ordinated 
action  and  the  closeness  with  which  Industry  is  linked  to  every  other 
element  of  our  national  life  and  strength.  But  to  bring  home  these  truths 
to  the  bulk  of  Employers  and  Employed,  it  will  be  necessary  to  make  very 
clear  the  relations  between  the  various  parties  to  Industry,  and  between 
Industiy  itself  and  social  and  jwlitical  development.  The  unity  of  national 
effort  in  the  war  has  arisen  mainly  from  the  clearness  of  the  issues  involved 
and  the  force  with  which  they  have  been  brought  home  to  every  section  of 
the  people.  In  order  to  achieve  a  similar  unity  of  purpose  and  effort  in  the 
activities  of  peace,  it  will  be  necessary  to  make  the  issues  equally  plain  and 
to  embody  in  the  form  of  a  complete  policy  the  principles  which  underlie 
them. 

10.  The  idea  that  the  united  front  shown  by  the  country  to  the 
external  enemy  implies  of  itself  the  burial  of  class  hatred  and  suspicion 
and  that  the  suspension  of  controversy  during  the  war  foreshadows  the 
cessation  of  industrial  disputes  after  the  war,  is  dangerous  just  because 
it  is  so  attractive.  The  natural  desire  to  accentuate  the  appearance  of 
unity  and  minimise  internal  differences  leads  us  to  treat  as  negligible 
sections  of  public  opinion  which  are  really  powerful  and  may  become  pre- 
dominant. The  spirit  of  patriotism  which  induces  the  majority  of  all 
classes  to  remain  silent  as  to  their  grievances  is  construed  to  mean  that  the 
feeling  of  grievance  does  not  exist.  At  the  same  time  that  criticism  is  de- 
noiinced  as  unpatriotic,  abstention  from  criticism  is  supposed  to  imply 
unqualified  approval. 

11.  The  war  has  not  put  an  end  to  industrial  unrest.  Every  one  of 
the  old  causes  of  dispute  remains,  and  others  of  a  most  serious  nature  have 
been  added  in  the  course  of  the  war.  The  very  moderation  and  unselfish- 
ness shown  by  the  responsible  leaders  of  Organised  Labour  are  looked  upon 
by  important  sections  of  their  following  as  a  betrayal  of  the  cause  and  by 
some  Employers  as  a  tactical  opportunity.  The  efforts  of  the  Government 
to  safeguard  the  interests  of  the  workers  are  likely  to  give  rise  to  unrea- 
sonable demands  for  future  action  on  the  one  side  and  ungenerous  criticism 
on  the  other.  The  diflicult  and  complex  problem  of  the  return  to  peace 
conditions  will  bristle  with  thorny  questions  only  to  be  solved  successfully 
by  the  clear-sighted  and  unselfish  co-operation  of  all  concerned.  There  are 
too  many  indications  that  they  may  be  approached  in  a  spirit  of  passion 
and  suspicion  which  would  render  a  satisfactory  solution  impossible. 

12.  This  would  be  a  serious  matter  even  if  the  industrial  problem 
stood  alone.  Failure  to  cope  with  the  economic  situation  must  necessarily 
involve  widespread  loss  and  misery.  But  the  industrial  problem  is  inex- 
tricably entangled  with  social  and  political  development.     It  is  not  merely 

12 


that  a  certain  minimum  standard  of  material  well-being  is  a  necessary  con- 
dition of  moral  and  intellectual  advance,  or  that  commercial  prosperity  is 
an  important  factor  in  the  strength  and  prestige  of  the  State.  Industry 
itself  has  a  human  side.  The  discontent  of  Labour  is  not  exclusively  a 
matter  of  wages  and  hours  of  work.  It  is  becoming  increasingly  evident 
that  it  is  based  to  a  very  large  extent  upon  questions  of  status  and  social 
conditions.  It  is  not  to  be  desired,  however,  that  the  matter  should  be 
considered  from  a  class  or  sectional  standpoint.  Industrial  life  is  simply 
one  phase  of  the  national  activities,  and  the  responsibility  of  seeing  that 
the  conditions  of  industrial  life  are  such  as  make  for  conscious  and  efficient 
citizenship  rests  upon  the  community  as  a  whole.  The  spirit  in  which  both 
Employers  and  Employed  regard  their  common  work  will  colour  not  only 
their  relations  to  each  other,  but  their  general  attitude  towards  the  cor- 
porate life  of  the  nation.  That  attitude  has  been  roughly  challenged  by  the 
war,  which  has  profoundly  disturbed  the  current  both  of  circumstances  and 
of  ideas.  It  has  shaken  men's  faith  in  the  i>ermanence  of  existing  condi- 
tions and  accustomed  them  to  the  contemplation  of  great  changes  and  to  the 
possibility  of  extraordinary  exertions.  The  moment  is  a  propitious  one  for 
an  attempt  to  understand  more  clearly  than-  in  the  past  the  fundamental 
principles  of  industrial  relations  and  their  place  in  the  national  life.  The 
forces  of  change  are  visibly  at  work,  and  it  rests  with  us  whether  we  allow 
them  to  hui'ry'  us  blindly  with  them,  or  direct  them  along  the  path  of 
ordered  progress. 

B. — The  Effects  of  the  War  on  the  Industrial  Situation 

13.  The  problems  arising  directly  from  the  effects  of  the  war  are,  in 
themselves,  sufficiently  serious.  It  has  involved  a  dislocation  of  industry,  a 
diversion  of  labour  and  capital  and  general  effort  to  purely  military  objects, 
which  has  not  only  made  inroads  on  the  national  wealth,  but  has  introduced 
altogether  new  factors  into  the  problems  of  our  industrial  life.  To  accom- 
plish the  change  from  war  to  peace  conditions  without  undue  friction  or 
loss,  to  accommodate  our  methods  and  organisation  to  the  new  burdens  and 
altered  circumstances,  is  a  task  as  heavy  as  any  trading  community  has  had 
to  face. 

14.  The  industrial  effects  of  the  war  may  be  grouped  under  five  main 
heads:  Employment;  Earnings;  Distribution  of  Earnings;  Capital  and 
Credit;  Spirit  and  Temper. 

I.— EMPLOYMENT 

15.  The  problem  of  Employment  has  two  phases:  (1)  the  Supply  of 
Labour;  and  (2)  the  Demand  for  Labour. 

(i)     The  Supply  of  Labour 
(a)  Demobilisation 

16.  The  first  factor  to  be  considered  is  the  return  of  some  three  or 
four  million  men  from  military  to  civil  life.     It  is  impossible  to  forecast 

13 


the  establishments  which  may  be  considered  necessary  after  the  war,  but 
even  on  the  assumption  that  our  standing  array  is  raised  to  a  Continental 
standard,  there  will  probably  be  somewhere  about  three  million  men  to  be 
re-induced  into  civil  employment. 

17.  The  problem  of  demobilisation  is  already  receiving  attention  with 
a  view  to  preventing  the  flooding  of  the  labour  market.  The  cost  of  main- 
taining forces  on  the  present  scale  must,  however,  set  a  limit  to  the  period 
of  demobilisation. 

(h)  Diminution  of  Government  Orders 

18.  In  addition  to  men  actually  under  arms,  those  who  have  been 
diverted  from  their  normal  employment  to  the  manufacture  of  munitions 
and  material  of  war  will  have  to  return  to  civil  industry  as  the  Government 
orders  for  naval  construction,  artillery,  ammunition  and  equipment  are 
reduced  to  the  peace  scale. 

(c)   Stopgap  and  Emergency  Workers 

19.  The  necessities  of  the  war  have  brought  into  active  employment 
a  large  number  of  people,  especially  women,  who  had  not  previously  been 
engaged  in  industry.  Some  of  these  have  been  introduced  into  various 
trades  to  take  the  place  of  men  serving  with  the  colours.  Others  have  been 
called  into  activity  by  the  abnormal  demand  for  miinitions  of  war.  Esti- 
mates of  the  increase  in  the  number  of  women  workers  in  the  productive 
side  of  industry  vary  between  200,000  and  300,000,  whilst  the  number  of 
those  engaged  in  commercial  and  institutional  occupations — offices,  shops, 
railways,  administration,  education — is  estimated  to  have  increased  by 
something  over  300,000;  but  it  is  to  be  remembered  that  a  great  proportion 
of  these  are  women  who  in  the  ordinary  course  would  have  retired  from 
industry.  A  large  number  of  former  non-producers  (in  the  industrial  sense) 
have  none  the  less  been  added  to  the  labour  force  of  the  country.  It  is 
probable  that  many  of  these  will  desire  to  remain  wage-earners.  Apart 
from  the  attraction  of  economic  independence,  some  will  be  compelled  to 
seek  continued  employment  by  the  death  or  disablement  of  those  on  whom 
they  were  dependent,  or  by  diminution  of  income  through  the  financial 
results  of  the  war.  In  addition,  there  are  large  numbers  of  women  who 
have  left  their  ordinary  employment  to  take  up  munition  work.  These 
women,  as  well  as  the  men  who  have  been  transferred  from  civil  to  war 
industries,  will  have  to  return  to  their  former  occupations  or  find  other 
jobs.  A  large  number  of  boys  have  also  been  introduced  into  industry, 
and  the  total  number  of  those  who  have  become  workers  for  the  first  time 
during  the  war,  or  have  been  transferred  from  one  form  of  employment  to 
another  as  the  direct  result  of  war  conditions,  will  probably  amount  to 
something  like  a  million  and  a  half,  divided  fairly  equally  between  the 
sexes.  When  the  special  necessities  of  their  war  employment  come  to  an 
end,  all  these  will  be  added  to  the  general  reservoir  from  which  the  supply 
of  labour  is  drawn. 

14 


(ii)     The  Demand  for  Labour 

20.  The  demand  for  Labour  will  arise  from  three  sources;  one  directly 
connected  with  the  war,  the  others  representing  a  return  to  normal 
conditions. 

(a)    Kepair  and  Eeconstruction   Demaxd 

21.  The  repair  and  replacement  of  property  damaged  or  destroyed 
during  the  course  of  the  war  will  be  an  important  factor  in  providing  im- 
mediate work.  In  this  country  the  amount  of  property  destroyed  is  com- 
paratively small ;  but  there  will  be  a  demand  for  new  tonnage  to  replace 
vessels  sunk,  for  commercial  motors  and  other  material  to  replace  those 
used  for  war  purposes.  Roads  cut  up  by  use  for  heavy  military  transport 
will  require  mending.  Plant  and  machinery  adapted  to  war  purposes  or 
left  idle  through  stagnation  of  trade  will  need  alteration  and  repair.  Re- 
pairs and  renewals  postponed  for  the  period  of  the  war  will  have  to  be 
carried  out.  Depleted  trading  and  domestic  stocks  will  have  to  be  replen- 
ished. In  the  devastated  districts  of  Belgium,  France  and  Poland  recon- 
struction on  a  big  scale  will  be  necessary.  Roads,  bridges,  railways,  fac- 
tories, machinery,  houses,  churches,  will  have  to  be  reconstructed  or  re- 
placed. In  all  this  work  our  foundries  and  factories  will  find  their 
opportunity. 

(b)  Revi\^al  of  Prr'ate  Demand 

22.  Whilst  the  daily  expenditure  of  some  munition  workers  and  gov- 
ernment contractors,  and  of  some  recipients  of  war  allowances,  has  largely 
increased  during  the  war,  the  private  expenditure  of  the  majority  of  people 
has  been  considerably  reduced.  They  have  spent  as  little  as  possible  on  new 
clothes,  new  furniture,  books,  utensils,  decorations.  Such  demands  may  be 
regarded  as  in  part  postponed  and  accumulating.  How  far  people  will  have 
the  means  to  make  their  demands  effective  will  depend  on  the  general  indus- 
trial and  financial  position,  but  it  is  to  be  expected  that  in  the  relief  and 
reaction  following  the  declaration  of  peace  money  will  be  more  freely  spent 
and  there  will  be  an  increase  in  the  demands  of  one  section  -of  the  public 
which  will  more  than  offset  the  decrease  in  the  expenditure  of  other 
sections. 

(c)  Revhal  of  Foreign  Trade 

23.  We  may  hope  also  for  a  revival  of  the  Foreign  Demand,  but  we 
shall  be  faced  by  foreign  competition  in  overseas  markets,  i)erhap3  still 
keener  than  before  the  war,  and  the  size  of  the  demand  itself  will  depend 
largely  upon  financial  conditions.  It  is  certain,  however,  that  many 
branches  of  commerce  suspended  by  the  war  will  revive.  Unfulfilled  con- 
tracts will  have  to  be  executed.  Orders  which  have  been  held  back  owing 
to  difficulties  of  transport,  or  to  the  diversion  of  labour  from  industry  to 
war  service  in  this  country,  will  come  forward.  The  release  of  shipping 
taken  over  for  war  purposes  will  enable  the  foreign  countries  most  affected 
to  make  good  a  long  period  of  interrupted  communication.     There  will 

IS 


be  a  loss  of  German  and  Austrian  orders,  but  this  loss  will  be  largely  com- 
pensated by  increased  trade  with  our  Dominions  and  Allies,  whilst  the 
chief  neutrals,  who  have  on  the  balance  considerably  profited  by  the  war, 
will  provide  unusually  g-ood  markets.  Taking  all  these  factors  together, 
it  is  probable  that  unless  a  violent  dislocation  of  the  foreign  exchanges  takes 
place,  there  will  be  a  considerable  revival  of  foreign  trade,  even  apart  from 
purely  reconstructive  orders.  It  may,  however,  be  some  time  before  it 
reaches  the  pre-war  level. 

PROSPECTS  OF  EMPLOYMENT 

24.  Against  the  effects  of  demobilisation,  the  cessation  of  Government 
orders  for  war  work,  and  the  addition  of  new  workers  to  the  labour  market, 
we  can,  therefore,  set  off  three  great  sources  of  employment — the  necessity 
for  reconstructive  work,  the  revival  of  private  buying  and  the  revival  of 
foreign  trade.  So  far  as  we  can  forecast  the  net  effect  of  these  factors,  we 
may  expect  a  considerable  amount  of  unemployment,  due  not  to  "shortage 
of  work"  or  "surplus  of  labour,"  but  to  the  general  dislocation  of  industry 
caused  by  the  war  and  the  difficulties  of  readjustment. 

25.  The  immediate  problem  will,  indeed,  be  rather  the  adjustment 
than  the  provision  of  employment.  The  returned  soldiers  and  discharged 
munition  workers  will  have  to  be  absorbed  into  the  trades  where,  the  demand 

'is  greatest.  Emergency  workers,  employed  on  Government  contracts,  will 
have  to  be  found  a  place  in  civil  industries.  In  cases  where  men  now 
serving  have  been  guaranteed  replacement  on  their  return,  the  stopgap 
workers  will  have  to  seek  other  occupation.  In  many  cases,  the  experience 
of  the  war  has  shown  that  a  workshop  or  office  can  be  run  effectively  by  a 
smaller  staff  than  hitherto  and  men  whose  places  have  not  been  guaranteed 
may  have  to  go  elsewhere.  It  is  probable  that  many  clerical  workers  and 
male  domestics  will  have  to  turn  to  industrial  employment,  owing  to  the 
competition  of  female  workers  and  the  continued  reduction  of  establish- 
ments. The  work  of  reconstruction  and  the  effect  of  orders  held  back 
for  the  period  of  the  war  will  create  an  abnormal  demand  in  special 
trades.  The  whole  machinery  of  industry  and  of  home  and  foreign  trade 
will  have  to  be  readjusted  to  normal  conditions.  To  carry  out  this  com- 
plicated task  will  tax  both  the  goodwill  and  ingenuity  of  all  con- 
cerned, if  it  is  to  be  accomplished  without  temporary  local  distress  of  a 
more  or  less  serious  character. 

II.— EARNINGS 

26.  The  first  step  in  any  enquiry  into  earnings  is  the  realisation  that 
Wealth  cannot  be  distributed  before  it  is  produced;  and  that  the  national 
income  cannot  exceed  the  aggregate  value  of  goods  produced  and  services 
rendered  within  the  country  or  received  from  without  in  payment  for 
goods  and  services,  or  as  interest  on  foreign  investments.  So  stated,  the 
proposition  will  be  recognised  as  a  truism,  but  a  failure  to  realise  its  truth 
lies  at  the  root  of  a  host  of  economic  fallacies,  especially  on  the  part  of 

16 


those  wlu)  concern  themselves  wht>lly  with  distribution  and  those  who  pre- 
scribe some  single  specific  as  the  cure  for  every  national  evil.  The  founda- 
tion of  prosperity  is  production  and  many  causes  will  tend  to  reduce  pro- 
duction after  the  war. 

Causes  Tending  to  Lessen  Production 

((/)     J\Ik.\     KlLf.Kl)    AM)    JncAI'AC  ITATKI) 

27.  A  very  large  niunber  of  those  formerly  engaged  in  productive  work 
will  have  been  killed,  or  wholly  or  partly  incapacitated.  We  can  only  guess 
at  the  figure,  but  it  may  probably  be  put  without  exaggeration  at  over  half 
a  million.  To  these  must  be  added  a  cetain  number,  who,  though  their 
names  have  not  appeared  in  the  lists  of  sick  or  wounded,  have  suffered 
in  body  or  in  mind  under  the  severe  conditions  of  trench  warfare  and  will 
feel  the  effects  of  the  strain  in  after  life. 

(h)  Emigration 

28.  Of  the  nuMi  who  come  back  it  is  at  least  possible  that  we  shall 
lose  large  numbers  through  emigration.  Many  will  have  become  discon- 
tented with  sedentary  occupations  and  will  prefer  the  free  and  open-air 
life  of  the  Oversees  Dominions.  Many  will  seek  better  prospects  abroad 
through  fear  of  the  hard  conditions  likely  to  be  found  at  home.  Such  has 
been  the  common  experience  of  nations  after  great  wars,  and  in  this  case 
the  Dominions  will  themselves  have  lost  a  large  number  of  workers  and 
will  be  the  more  inclined  to  encourage  immigration. 

29.  When  a  man  in  the  prime  of  life  dies  or  emigrates,  it  is  a  real 
loss  to  the  home  country.  It  is  true  that  he  has  consumed  as  well  as  pro- 
duced, and  when  he  is  gone  there  is  a  consumer  as  well  as  a  producer  less. 
But  an  adult  man  normally  produces  two  or  three  times  as  much  as  he  per- 
sonally consumes.  He  has  to  produce  enough  in  his  working  years  to  pro- 
vide for  the  up-bringing  of  children  and  for  maintenance  in  old  age.  Or, 
looking  at  it  in  another  way,  the  rearing,  educating  and  training  of  a  com- 
petent producer  entails  a  cost  of  several  hundred  pounds  to  the  community 
and  the  expenditure  vested  in  him  is  lost  to  that  community  when  he  dies 
or  leaves  and  settles  abroad. 

.']0.  Even  assuming  the  number  of  new  workers  to  equal  the  total  num- 
ber lost  by  death,  disablement  or  emigration,  we  shall  still  be  faced  by  a 
diminution  in  the  ranks  of  our  most  efficient  producers,  for  which  the  new 
and  imperfectly  trained  labour  introduced  during  the  war  will  form  only  a 
partial  substitute. 

((•)   Deterioration  of   ^^'Atlo^AI,  Plant 

31.  The  national  plant  will  have  seriously  deteriorated.  By  ''national 
plant"  is  meant  tlic  wlKtlc  machinery  of  production  and  distribution  with 
which  the  industries  of  the  country  are  carried  on — factories,  workshops, 
machines,  tools,  railways,  roads.  While  certain  trades  have  been  obliged 
to  maintain  tlKMuselves  at  the  highest  level  of  efficiency,  others  less  directly 

17 


associated  with  war  work  have  been  largely  at  a  standstill.  Renewals  and 
improvements  have  had  to  stand  over  till  after  the  war;  machinery  has  de- 
teriorated through  enforced  idleness  and  lack  of  attention.  The  permanent 
way  and  rolling-stock  of  our  railways,  the  upkeep  of  our  roads,  have  been 
perforce  neglected.  All  these  factors  make  for  diminished  efficiency  and 
reduced  production. 

(d)  Effects  of  Overwork 

32.  In  the  war  industries  many  employers  and  employees  have  been 
working  long  hours,  in  some  cases  with  no  week-end  break  and  no  holidays. 
The  strain  of  such  continued  over-exertion  can  be  borne  for  a  time,  but  its 
effects  are  felt  later.  Some  diminution  of  productive  capacity  must  be 
allowed  for  on  this  count. 

(e)  Suspension  of  Industrial  Education 

33.  Finally,  the  suspension  of  industrial  education  will  necessarily 
bear  fruit  in  lessened  efficiency.  Our  young  men  have  left  their  colleges 
and  technical  schools  for  the  trenches.  The  laboratories  and  training 
shops  have  been  turned  into  cramming  establishments  for  munition  work- 
ers. Apprentices  and  improvers  have  been  withdrawn  from  the  trades 
which  they  were  learning.  Boys  and  girls  who  would  have  been  appren- 
ticed to  various  trades  have  gone  to  blind-alley  work  in  the  munition  shops. 
In  addition  to  this  interference  with  directly  vocational  training,  the 
ordinary  schools  have  suffered  from  the  withdrawal  of  teachers,  the  intro- 
duction of  less  qualified  assistants  and  the  interruption  of  training  courses. 
Unless  an  effort  is  made  to  make  up  the  leeway,  there  is  a  danger  that  chil- 
dren now  in  the  schools  will  arrive  at  the  age  for  vocational  instruction 
with  their  general  intelligence  and  capacity  for  learning  less  fully  developed 
than  might  have  been  the  case. 

Causes  Tending  to  Increase  Production 

34.  Against  the  above  must  be  set  a  number  of  new  factors  tending 
to  increase  the  national  output.  In  many  ways  the  war  has  acted  as  a 
stimulus  to  industry.  While  the  strenuous  exertions  of  those  engaged  in 
war  industries  may  be  followed  by  a  reaction,  it  is  probable  that  on  the 
whole  the  habits  acquired  during  the  war  may  result  in  raising  the  general 
average  of  application.  Many  may  work  harder  and  more  efficiently  than 
they  did.  To  this  end  the  effort  to  recover,  in  harder  circumstances,  the 
standard  of  living  maintained  before  the  war  will  materially  contribute. 
Some  at  least  of  those  who  survive  the  ordeal  of  the  trenches  will  come 
back  keener,  quicker  and  more  physically  fit  than  they  went.  The  number 
of  former  non-producers  who  continue  working  will  probably  be  large,  and 
in  many  quarters  they  have  revealed  unsuspected  adaptability  and 
endurance. 

35.  Much,  though  by  no  means  all,  of  the  special  plant  erected  for 
war  purposes  can  be  adapted  to  peace  industries.  In  some  cases,  as  in  the 
shipbuilding  and  army  clothing  branches,  it  will  be  as  readily  available 

18 


for  manufacturing  for  the  i>eace  markets  as  for  supplying  naval  and  mili- 
tary requirements.  A  large  number  of  buildings  and  machine  tools  erected 
during  the  war  can  be  taken  over  with  little  or  no  alteration.  Others  can 
be  converted  to  the  uses  of  ordinary  trade  in  the  same  way  as  those  existing 
before  the  war  were  adapted  to  the  manufacture  of  munitions. 

36.  Under  the  stress  of  war  there  has  arisen  a  keener  appreciation 
of  the  need  for  scientific  production.  In  many  trades  great  strides  have 
been  made  in  the  direction  of  standardisation  of  parts,  better  management 
of  the  supply  of  raw  material  and  better  organisation  of  business.  A 
knowledge  has  been  gained  of  special  processes  hitherto  monopolised  by 
German  or  Austrian  firms.  Our  manufacturers  have  become  accustomed 
to  the  supply  of  necessary  articles  on  a  larger  massed  scale.  In  the  engi- 
neering industry  the  use  of  jigs,  limit  gauges,  and  automatic  or  semi- 
automatic machine  tools  has  been  enormously  extended,  and  works  that 
have  acquired  for  the  first  time  an  intimate  familiarity  with  these  appli- 
ances will  doubtless  continue  to  use  them  in  connection  with  their  accus- 
tomed work  after  the  war. 

37.  But  when  all  these  things  have  been  allowed  for,  it  remains  certain 
that  the  national  production  must,  for  many  years,  be  reduced,  unless  it  can 
be  rendered  more  efficient  by  better  organisation  of  Industry. 

Reduction  of  Income  from  Abroad 

38.  How  far  the  income  hitherto  received  from  abroad  in  the  shape 
of  interest  on  foreign  investments  will  prove  to  be  diminished  after  the  war 
is,  at  present,  problematical.  The  heavy  sales  of  foreign  securities  and 
the  contraction  of  national  and  private  debts  in  foreign  money  markets 
will  make  for  a  considerable  diminution ;  but  against  this  must  be  set  off 
the  loans,  almost  equivalent  in  amount,  made  to  our  Dominions  and  Allies, 
which  will  presumably  bear  interest  and  be  subject  to  repayment.  Income 
from  this  latter  source  will  be  government  income,  and  will  go  to  pay  inter- 
est and  redemption  on  State  loans  contracted  at  home  and  abroad.  Income 
from  abroad  in  the  shape  of  payment  for  shipping,  banking,  and  insurance 
services,  may  take  some  years  before  it  reaches  its  pre-war  level. 

Net  Effect  of  the  War  on  Earnings 

39.  Taken  as  a  whole,  there  can  be  no  reasonable  doubt  that,  unless 
an  organised  effort  towards  increased  production  is  made,  the  aggregate 
national  income  is  likely  to  be  much  lower  than  before  the  war.  The  de- 
crease will  be  cloaked  to  some  extent  by  the  inflation  of  money  values. 
It  is  conceivable  that  whilst  real  income  in  terms  of  goods  and  services  will 
be  diminished,  nominal  income  in  terms  of  money  will  be  the  same  or  even 
higher.  This  may  ease  matters  for  a  while,  but  in  the  long  run  income  is 
assessed  at  its  intrinsic  value;  and  with  the  smaller  total  available  for 
distribution,  the  likelihood  of  quarrelling  over  its  apportionment  will 
increase. 

19 


III.— THE  DISTRIBUTION  OF  EARNINGS 

40.  With  a  general  reduction  in  the  national  income — the  amount  of 
wealth  to  be  distributed — the  question  of  distribution  will  become  acute. 
It  will  be  complicated  and  intensified  by  the  introduction  of  several  new 
factors. 

(a)     High  Prices 

■  41.  The  rise  in  the  cost  of  living'  has  imposed  a  burden  on  the  working 
and  lower  middle  classes  during  the  war,  which  is  perhaps  inadequately 
appreciated  by  those  who  are  accustomed  to  a  larger  margin  for  retrench- 
ment. The  release  of  shipping  employed  for  war  purposes,  the  resumption 
of  industry  and  the  re-opening  of  closed  sources  of  supply  will  no  doubt 
operate  in  the.  direction  of  a  fall.  On  the  other  hand,  the  general  decrease 
in  production,  the  higher  cost  of  production  due  to  deterioration  of  plant 
and  diminished  efficiency,  the  corresponding  decrease  in  production  abroad 
and  the  general  financial  and  industrial  dislocation  will  all  conspire  to  keep 
prices  up  or  even  to  force  them  still  higher.  The  probable  sequel  will  be 
a  demand  for  increasp  in  nominal  wages  to  enable  the  previous  level  of 
real  wages — the  standard  of  living — to  be  maintained.  The  satisfaction 
of  tliis  demand  may  quite  well  lead  to  a  further  raising  of  prices,  result- 
ing in  much  hardship  among  those  employed  in  trades  in  which  no  increase 
of  wages  has  been  secured.  The  professional  classes  and  clerical  workers, 
whose  nominal  earnings  have  not,  generally  speaking,  been  increased  during 
the  w^ar,  will  be  very  hard  hit.  The  real  value  of  incomes  derived  from 
investments  paying  a  fixed  rate  of  interest  will  be  appreciably  diminished. 
Apart  from  currency  influences,  the  lowering  of  prices  will  depend  upon 
increased  industrial  output,  and  upon  the  extent  to  which  the  consump- 
tion of  luxuries,  with  its  consequent  employment  of  workers  on  the  creation 
of  useless  commodities,  is  foregone,  enabling  labour  to  be  diverted  into 
industries  producing  the  necessaries  of  life.  Increased  taxation  will  eon- 
tribute  to  this  end,  but  will  not  relieve  wealthier  people  of  the  obligation 
to  accept  without  demur  a  diminished  proportion  of  the  national  income 
if  this  should  prove  to  be  necessary  in  order  to  save  the  poorer  sections 
of  the  community  from  severe  hardships.  Ill-considered  fiscal  changes 
might,  on  the  other  hand,  drive  prices  still  higher  or  retard  their  fall. 

(h)     High  War  Wages 

42.  The  urgent  demand  for  munitions  and  material  of  war,  together 
with  shortage  of  labour,  has  led  to  high  rates  of  wages  being  paid  for  war 
work.  The  amount  of  such  increases' has  been  greatly  exaggerated  in  the 
popular  mind  by  confusing  weekly  earnings  with  rate  per  hour.  The  large 
sums  frequently  mentioned  as  being  taken  home  by  particular  workmen 
at  the  end  of  the  week  are  in  almost  all  cases  earned  by  unsparing  labour 
on  piece  tasks,  or  by  working  long  hours  overtime.  Family  earnings  have 
also   in  many  cases  been  increased   as   a  result  of  more  members  of  the 

20 


family  going  out  to  work.  The  standard  of  comparison  in  any  considera- 
tion of  wage  movements  is  the  rate  per  hour,  and  whilst  wage  rates  in 
the  munition  industries  have  substantially  increased,  the  avei'age  advance 
in  all  industries  has  been  more  than  counterbalanced  by  the  rise  in 
prices.  It  follows,  therefore,  that  any  serious  reduction  in  rates  after  the 
war  will  leave  the  generality  of  workers  in  a  far  worse  position  than  before 
the  war.  It  is  to  be  remembered  also  that  there  are  a  great  many  employ- 
ments in  which  wages  have  increased  not  at  all  or  very  little  during  the 
war.  Wage-earners  in  these  cases  are  already  suifering  from  the  increase 
of  prices,  and  will  continue  to  suffer  long  after  peace  is  declared,  unless 
some  very  definite  steps  are  taken  to  improve  their  lot. 

43.  The  attitude  of  unskilled  and  unorganised  labour  after  the  war 
will  be  influenced  by  the  fact  tliat  in  military  service  many  of  them  will 
have  made  acquaintance  with  a  hitherto  unknown  standard  of  maintenance. 
They  have  been  better  fed  and  better  clothed  than  ever  before.  Their 
dependents,  too,  have  been  receiving  State  allowances,  often  increased  by 
their  own  earnings.  These  people  will  not  readily  go  back  to  the  old 
conditions  of  employment  and  life.  For  these  reasons,  among  others,  large 
sections  of  lower-paid  wage-earners  will  resent  and  resist  any  attempt  to 
make  good  a  reduction  in  the  national  income  at  the  expense  of  themselves 
and  their  families. 

(c)     War  Loans  and  Taxation 

44.  All  enormously  increased  national  debt  will  be  one  of  the  inevi- 
table legacies  of  the  war.  Its  amount  will  depend  upon  the  duration  of 
the  war,  but  it  will  probably  not  be  less  than  £3,000,000,000.  The  payment 
of  interest  on  this  debt,  and  the  provision  of  a  sinking  fund  for  its  redemp- 
tion, will  involve  an  annual  expenditure  begimiing  at  £250,000,000  and 
diminishing  gradually  year  by  year  as  the  debt  is  reduced.  This  will 
materially  affect  the  distribution  of  the  national  income.  A  portion  of  the 
debt  may  be  presumed  to  be  covered,  as  already  mentioned  by  loans  to 
Allies  and  to  the  Dominions,  but  as  for  the  rest  the  financial  obligations 
of  the  Xational  Debt  will  entail  the  transference  of  say  £200,000,000  per 
annum,  roughly  one-tenth  of  the  whole  national  income,  from  the  general 
body  of  taxpayers  to  a  comparatively  small  class  of  investors.  How  far 
this  will  intensify  inequalities  in  distribution  will  depend  upon  the  inci- 
dence of  after-war  taxation.  If  an  undue  share  of  the  burden  is  placed 
upon  the  non-investing  classes  the  balance  of  distribution  will  be  seriously 
disturbed,  and  it  is  even  conceivable  that  a  demand  for  repudiation  might 
arise.  The  possibility  of  this  becomes  less  remote  when  the  situation  in 
Germany  and  Austria  is  considered.  There  is  likelihood  of  the  German 
and  Austrian  Governments  being  unable  to  pay  the  interest  on  their  war 
debts,  and  legislation  amounting  to  virtual  repudiation  may  have  to  be 
passed.  Such  an  example  would  not  be  without  its  reactions  here.  It 
would  be  asked  how  we,  overloaded  with  debt  and  taxes,  were  to  compete 
in  the  world's  markets  with  nations  who  had  repudiated  their  debts.     But 

21 


anything  amounting  to  even  partial  repudiation  or  to  adverse  discrimina- 
tion beteen  holders  of  war  loan  and  of  other  secvirities  would  be  unjvist, 
dishonourable  and  disastrous.  Any  drift  in  that  direction  can  best  be 
prevented  by  encouraging  wage-earners  to  save  and  to  invest  their  savings 
in  small  Government  bonds;  but  still  more  by  avoiding,  after  the  war, 
the  raising  of  revenue  by  the  taxation  of  necessaries.  If  the  incidence 
of  taxation  is  such  that  revenvie  is  drawn  mainly  from  the  creditor  classes, 
the  distribution  of  the  national  income  will  so  far  be  left  unaffected. 

(d)     Dearness  of  Capital 

45.  With  the  prospective  diminution  in  the  volume  and  flow  of 
wealth,  capital  available  for  investment  will  be  scarce  and  dear  and  credit 
facilities  are  likely  to  be  limited.  The  argument  has  been  put  forward 
that  the  new  national  debt  makes  ideal  banker's  collateral,  and  so  con- 
stitutes a  basis  for  a  great  extension  of  credit;  but  this  appears  to  over- 
look the  fact  that  the  volvime  of  credit,  though  conditioned  by  enterprise 
and  confidence,  is  otherwise  dependent  upon  the  continuous  output  of 
actual  wealth.  While  a  particular  kind  of  paper  may  be  more  acceptable 
as  a  basis  of  credit  than  another,  an  increase  in  the  amount  of  that  paper 
will  not  swell  the  volume  of  credit  as  a  whole.  There  is  also  some  expec- 
tation that  the  Government  will  be  able  to  repeat  and  perhaps  to  extend 
the  operations  of  August,  1914,  in  the  way  of  credit  creation  or  subsidy; 
but  here  again  it  is  apt  to  be  overlooked  that  such  emergency  measufes 
cannot  by  their  very  nature  be  made  a  permanent  and  continuous  feature 
of  the  financial  system.  New  capital  may,  therefore,  be  expected  to  com- 
mand a  high  return  after  the  war,  and  to  absorb  a  correspondingly  large 
share  of  the  national  income  in  proportion  to  the  amount  of  capital 
provided. 

PROSPECTS  WITH  REGARD  TO  THE  DISTRIBUTION 

OF  EARNINGS 

46.  Of  the  four  above-mentioned  factors  tending  to  infiuence  dis- 
tribution, two,  high  prices  and  dear  capital,  will  react  unfavourably  to 
Labour  and  are  hardly  susceptible  of  concerted  or  legislative  modification. 
High  prices  may  make  for  higher  profits,  and  thus  enable  higher  wages 
to  be  paid;  but  unless  the  national  finances  are  handled  with  great  dis- 
cretion heavy  taxation  will  operate  against  both  the  making  of  profits  and 
the  enjoying  of  wages  received.  The  loading  of  the  scales  would  in  any 
case  appear  to  be  against  Industry,  and  perhaps  more  particularly  against 
Labour;  and  unless  every  eifort  is  made  to  expand  the  national  output  it 
is  difficult  to  see  how  conflicts  between  employers  and  employed  can  be 
avoided. 

IV.— CAPITAL  AND  CREDIT 

47.  It  has  already  been  shown  that  the  fixed  Capital  of  the  country, 
its  plant  and  communications,  will  have  deteriorated  to  a  serious  extent, 

22 


and  that  new  Capital  will  be  scarce  and  dear  owing  to  the  restriction  of 
production  and  war  losses.  The  critical  period  for  credit  will  not  have 
been  passed  until  twelve  months  after  the  end  of  the  war,  when  the  emer- 
gency legislation  affecting  bills  of  exchange,  debts  and  mortgages  expires. 
It  is  possible  that  when  embargoes  are  removed  and  financial  obligations 
have  to  be  met,  it  may  be  necessary  for  the  State  to  exercise  discretion 
and  even  to  ask  for  new  powers  in  order  to  stave  off  a  partial  collapse 
of  credit. 

v.— SPIRIT  AND  TEMPER 

48.  The  problems  presented  by  the  industrial  situation  would  be 
difficult  enough  if  they  were  faced  in  the  best  spirit  and  with  the  coolest 
wisdom.  Unfortunately,  as  has  already  been  suggested,  there  is  a  strong 
likelihood  of  their  being  complicated  by  the  existence  on  all  sides  of  an 
ugly  temper  which  renders  it  difficult  to  arrange  an  acceptable  settlement 
of  the  issues  at  stake. 

49.  In  so  far  as  this  temper  is  directly  coimected  with  the  war  it 
may  be  summarized  under  three  heads : — Economic  Discontent ;  Class- 
Svispicion;  Psychological  Reactions. 

(a)     Economic  Discontent 

50.  We  have  seen  that  several  causes  will  conspire  to  reduce  the 
earnings  of  Labour  after  the  war.  Even  should  nominal  wages  remain  at 
a  high  level  or  be  increased,  real  wages  will  be  low  owing  to  the  increase 
in  prices.  At  the  same  time  there  will  be  a  certain  amount  of  unemploy- 
ment due  to  the  difficulties  of  readjustment. 

51.  These  are  phenomena  particularly  likely  to  cause  discontent. 
The  man  who  sees  that  while  he  is  receiving  more  money,  his  spending 
power  is  actually  decreased,  the  man  who  finds  a  difficulty  in  obtaining 
work,  although  he  knows  that  there  is  no  general  lack  of  demand  for 
labovir,  are  both  apt  to  imagine  themselves  cheated,  and  to  break  out  into 
fierce  resentment  against  those  better  off  than  themselves.  To  say  that 
this  resentment  is  in  large  part  the  result  of  defective  reasoning  will  not 
get  rid  of  the  trouble.  It  is  not  easy  for  men  to  reason  on  economic 
causes  when  the  result  is  felt  not  merely  in  need  for  retrenchment  but 
in  want  of  necessaries. 

52.  The  sense  of  hardship  will  be  aggravated  by  the  cessation  of 
separation  allowances.  There  is  no  doubt  that  in  many  cases,  such  as  the 
families  of  agricultviral  labourers  and  unorganised  workers,  the  separation 
allowances  have  represented  a  substantial  increase  in  spending  power, 
while  the  wage-earner  has  been  better  fed  and  cared  for  in  the  Army  than 
ever  before.  They  will  not  go  back  without  protest  to  the  old,  often 
wretched,  conditions  of  their  life  before  the  war. 

53.  Unless  same  means  can  be  found  of  counteracting  the  tendencies 
above  discussed,  the  lot  of  the  wage-earner  is  likely  to  be  a  hard  one.    At 

23 


the  same  time,  the  demand  for  reasonable  remuneration  and  decent  con? 
ditions  will  be  stronger  than  ever.  The  national  exertions  during  the 
war  have  profoundly  affected  the  minds  of  the  working  class  and  have 
impressed  them  with  perhaps  an  exaggerated  notion  of  the  power  of  the 
State  and  the  extent  of  the  national  resources.  It  will  no  longer  be  pos- 
sible to  silence  the  demand  for  social  reforms,  by  the  assertion  that  they 
cannot  be  afforded.  Such  a  contention  will  be  met  by  the  argument  that 
a  nation  which  lias  l)een  able  in  an  emergency  to  find  several  millions  a 
day  for  war  purposes  cannot  plead  poverty  as  an  excuse  for  neglecting  the 
improvement  of  social  or  industi-ial  conditions. 

54.  While  there  is  a  danger  that  the  real  earnings  of  Labour  will 
be  reduced,  the  real  profits  of  Capital  and  Management  may  suffer  a 
similar  diminution  due  to  restricted  output,  increased  cost  of  production 
and  heavy  taxation,  whereupon  the  three  great  partners  in  Industry  will 
be  threatened  simultaneoiisly  and  the  comipetition  between  them  for  its 
proceeds  will  be  intensified  and  embittered. 

(^>)     Class-Suspicion 

55.  The  necessities  of  the  war,  especially  with  regard  to  the  pro- 
duction of  munitions,  have  resulted  in  the  temporary  abandonment  of 
many  of  the  Trades  ITnion  "safeguards."  The  two  most  important 
instances  are  the  removal  of  restrictions  on  output  and  hours  of  work  and 
the  dilution  of  skilled  Union  Labour  by  partly  skilled  or  unskilled,  non- 
T^nion  Labour.  Pledges  have  been  given  for  the  restoration  of  the  status 
quo.  The  new  developments  of  industry,  the  springing  up  of  a  great  army 
of  new  workers,  and  the  difiiculties  of  readjustment,  will  make  it  very 
much  more  difficult  than  was  expected  to  fulfil  these  pledges  literally. 
Unless  some  new  equivalent  can  be  found  which  will  convince  the  mem- 
bers of  the  Unions  themselves  that  they  have  gained  more  than  they 
have  lost,  there  will  very  naturally  be  a  strong  feeling  of  resentment. 
There  is  already  only  too  prevalent  a  belief  that  advantage  is  being  taken 
of  the  war  to  prejudice  the  position  of  Labour.  Any  hitch  arising  in  the 
restoration  of  Trade  Union  "safeguards"  will  powerfully  reinforce  this 
belief.  The  allegations  made  by  both  Employers  and  Employed  that  the 
necessities  of  the  war  have  been  turned  to  account  for  the  promotion  of 
class  or  personal  interests,  the  fear  that  returned  soldiers  may  be  used  as 
"blackleg"  labour,  the  fear  of  the  permanent  introduction  of  compulsory 
military  service  as  a  means  of  strike-breaking  and  neutralising  the  power 
of  Organised  Labour,  the  recollection  of  war-time  strikes,  will  all  tend 
to  increase  the  bitterness  of  class-suspicion. 

(c)     Psychological    Reactions 

5(5.  We  have  further  to  face  the  fact  that  the  discontent  due  to 
economic  conditions  will  be  aggravated  by  certain  features  in  the  general 
temper   and   spirit   of  the  nation. 

57.  An  effort  so  stupendous  as  that  made  during  the  war  is  almost 
invariably  followed  by  a    reaction.     It  is  a  great  thing  that  the  response 

24 


to  the  national  call  shonkl  have  been  as  ready  as  it  has,  that  the  Trade 
Unions  should  have  yielded  np  their  most  prized  safeguards,  that  men 
should  have  laboured  in  the  munition  shops  until  they  dropped  at  their 
work,  that  the  Income  Tax  payer  should  have  submitted  without  murmur- 
ing to  an  unprecedented  increase,  that  so  much  thought  and  effort  as  well 
as  money  should  have  been  poured  by  the  leisured  classes  into  national 
channels.  But  all  history  teaches  us  that  unless  this  energy  and  self- 
sacrifice  receives  a  fresh  impetus  not  less  potent  than  that  of  the  war, 
the  removal  of  the  stimulus  will  be  followed  by  a  dangerous  slump. 

58.  We  have  to  take  into  account  that  those  who  are  crushed  or 
hampered  by  the  burdens  arising  from  a  war  are  apt,  when  they  take  stock 
of  their  position,  to  lay  the  blame  on  those  responsible  for  the  Government 
of  the  nation  during  the  war,  even  though  they  themselves  cordially 
supported  the  country's  participation  in  it. 

59.  It  must  be  remembered  that,  however  these  burdens  may  be  dis- 
tributed, "Equality  of  Sacrifice"  is  in  point  of  actual  fact  impossible.  The 
percentage  of  income  reduction  which  means  to  one  man  the  giving  up 
of  luxuries  and  curtailing  of  travel,  means  to  another  shortage  in  the 
necessaries  of  life.  The  obligation  to  serve  implies  in  some  cases  tem- 
porary embarrassment  and  a  reduced  income;  in  other  cases  it  implies 
selling  up  the  home  and  business  ruin.  To  the  sorrow  of  those  whose 
relatives  have  been  killed  or  injured,  there  is  added  in  many  cases  the 
hardship  caused  by  loss  of  the  bread-winner.  Great  numbers,  both  of  the 
working  class  and  the  lower  middle  class,  will  be  hit  by  the  war  in  a  way 
that  those  in  different  circumstances  can  only  appreciate  with  difficulty. 
Inevitable  as  this  may  be  and  unreasonable  as  it  may  seem  that  inevitable 
suffering  should  result  in  social  or  x)olitical  discontent,  it  is  no  use  shutting 
our  eyes  to  the  danger  that  it  may  do  so. 

60.  There  is  no  doubt  that  the  working  of  the  Munitions  Acts  and 
the  Military  Service  Acts,  the  methods  adopted  in  certain  quarters  to  pro- 
mote recruiting,  the  abolition  of  Trade  Union  restrictions,  the  enormous 
profits  made  in  certain  trades,  the  rise  in  food  prices,  have  sown  the  seeds 
of  a  great  deal  of  bitterness.  Much  of  it  may  be  unreasonable,  much  of 
it  based  upon  demonstrably'  false  assumptions  and  fanned  by  unscrupulous 
controversialists  on  both  sides;  but  again  we  are  dealing  with  facts  which 
must  be  faced. 

61.  There  is  thus  no  lack  of  inflammable  material  ready  to  the  hands 
of  the  incendiary.  The  incendiary  is  not  far  to  seek  and  may  be  found 
in  all  classes.  It  is  easy  to  persuade  bitterly  discontented  men  that  if 
society  is  thrown  into  the  melting  pot  their  condition  cannot  be  rendered 
worse  and  may  be  rendered  better.  It  may  be  argued  that  force  is  no 
remedy  for  economic  evils,  and  that  its  application  to  social  questions 
gives  very  uncertain  results.  But  such  arguments  require  a  clearer  atmos- 
phere than  that  of  class-hatred  and  suspicion,  and  unless  a  practical  and 
attractive  alternative  can  be  offered,  there  is  a  grave  danger  that  tlie 
extremists  may  persuade  a  large  following  to  try  the  chance  of  industrial 

25 


warfare.  The  danger  of  an  appeal  to  force  in  some  form  is  all  the  greater 
that  the  war  has  habituated  men  to  the  idea  of  conflict  as  the  means  of 
settling  disputes. 

62.  On  the  other  hand  we  have  the  danger  arising  from  a  reactionary 
section  among  Employers,  who,  like  the  Labour  extremists,  believe  in  the 
inevitability  of  class-warfare.  There  is  a  real  danger  that  this  section 
may  adopt  to  some  extent  the  German  view  of  Labour  as  a  force  which 
needs  to  be  controlled  and  disciplined  from  above  and  may  regard  the  war 
as  an  opportunity  to  accomplish  this  end.  There  is  reason  to  fear  that 
some  Employers  look  on  the  Military  Service  Acts,  the  State  control  of 
war  industries  and  the  temporary  abandonment  of  Trade  Union  restric- 
tions, as  an  opportunity  to  establish  once  for  all  the  ascendency  of  Capital 
over  Labour.  It  is  not  desired  to  question  in  these  pages  the  necessity  of 
any  measure  adopted  during  the  course  of  the  war.  The  gravity  of  the 
danger  consists  in  this  half-acknowledged  intention  to  use  the  new  con- 
ditions which  have  arisen  for  the  coercion  of  one  of  the  parties  whose 
co-operation  has  made  the  carrying  on  of  the  war  possible. 

PROSPECTS  AS  TO  SPIRIT  AND  TEMPER 

63.  The  combination  of  economic  discontent,  class-suspicion,  the 
doctrines  of  Social  Eevolutionaries  and  the  danger  of  Industrial  Pru's- 
sianism,  threatens  us  with  a  bitter  conflict  between  Capital  and  Labour 
which  would  render  it  impossible  to  deal  successfully  with  the  problems 
of  readjustment  and  reconstruction.  Only  by  uniting  the  efforts  of  all 
classes  towards  common  ends,  on  the  lines  of  a  broad  national  policy,  can 
such  a  catastrophe  be  averted. 


26 


C. — The  Problem  and  Some  Remedies 

I.— THE  PROBLEM 

64.  The  Problem  before  us  has  been  sufficiently  indicated  by  the  fore- 
going analysis  of  the  dangers  with  which  we  are  threatened  and  the 
difficulties  which  lie  in  our  way.  It  is  only  necessary  to  summarise  it 
very  briefly. 

(i)     The  Emergency  Problem 

65.  The  Emergency  Problem  is  simply  to  avert  an  outbreak  of  indus- 
trial anarchy  in  the  period  immediately  following  the  war. 

66.  The  urgency  of  the  task  can  only  be  measured  by  the  magnitude 
of  the  danger.  That  the  possibility,  even  the  probability,  of  such  a 
development  is  a  very  real  one  there  is  every  reason  to  believe.  Whatever 
the  upshot  of  such  an  outbreak  its  effects  would  be  almost  equally  disastrous 
to  all  classes  of  the  community. 

67.  To  Capital  it  would  mean  a  long  period  of  suspended  activity, 
depreciation  and  possibly  wreckage  of  plant,  heavy  financial  loss,  a  fatal 
handicap  in  competition  with  foreign  manufacturers.  ''Victory''  would 
be  dearly  won  at  the  price  of  leaving  Labour  dicontented,  inefficient, 
mutinous,  ready  to  renew  the  fight  at  the  first  opportunity.  While  the 
questions  at  issue  might  be  shelved  as  the  result  of  a  Labour  defeat,  they 
would  not  be  solved  and  the  increased  class  hostility  generated  by  the 
conflict  would  remain  an  insuperable  bar  to  the  development  either  of 
industrial  efficiency  or  financial  confidence. 

68.  To  Labour,  indiistrial  warfare  involves  a  long  period  of  hardship 
and  privation.  Any  material  advantages  gained  would  be  largely  dis- 
counted by  the  siifferings  to  be  endured,  the  depletion  of  Trades  Union 
Funds  and  the  crippling  of  the  sources  of  production  from  which  alone 
the  wealth  of  any  class  can  be  derived.  Against  the  prospect  of  improved 
working  conditions  and  fuller  recognition  of  the  rights  of  Labour,  must 
be  set  the  risk  of  internal  dissensions  arising  during  a  prolonged  struggle, 
and  the  possible  loss  of  all  that  has  been  won  in  past  years. 

69.  A  clear  cut  victory  for  either  side  is  improbable.  In  an  indus- 
trial conflict  on  the  scale  anticipated,  it  is  unlikely  that  the  anticipations 
of  either  Employers  or  Employed  would  be  fulfilled.  The  passions  let  loose 
and  excited  by  the  losses  of  Capital,  the  sufferings  of  Labour  and  the 
hardships  arising  to  the  whole  community  from  high  prices,  scarcity  of 
commodities,  dislocation  of  the  ordinary  activities  of  life  and  destruction 
of  confidence,  might  easily  create  a  drift  towards  general  chaos  which 
would  defy  the  control  of  either  Capitalist  or  Working-class  organisations. 

27 


It  is  not  improbable  that  an  intolerable  situation  would  be  ended  by  hasty 
and  ill-considered  State  action,  placing  Industry  as  a  whole  under  the 
yoke  of  a  bureaucratic  tyranny — a  sort  of  industrial  Napoleonism. 

70.  Whatever  the  event  of  the  dispute,  the  prize  of  victory  would 
perish   in  the  struggle. 

(ii)     The  Constructive  Problem 

71.  The  Constructive  Problem  is  concerned  with  the  more  lasting 
effects  of  the  war  and  with  those  difficulties,  social  as  well  as  economic, 
of  our  industrial  life,  which  it  has  accentuated  though  it  has  not  created. 
On  the  one  hand  we  have  to  readjust  and  reorganise  our  industries  to 
meet  the  new  conditions,  to  provide  for  replenishing  the  national  capital 
and  maintaining  or  increasing  the  national  income.  On  the  other  hand, 
we  have  to  remove  the  evils  which  have  rendered  the  industrial  problem 
an  irritant  in  our  social  life,  to  preserve  and  strengthen  the  safeguards 
of  individual  liberty  and  self-respect  and  to  reconcile  the  conflicting  claims 
of  efficient  production  and  fullness  of  life  for  the  Workers.  To  do  this 
with  success  we  must  face  boldly  the  whole  question  of  indvistrial  policy. 
We  must  endeavour  to  devise  some  means  by  which  the  wasteful  friction 
between  Employers  and  Emi^loyed  may  be  replaced  by  co-operation  to  secure 
these  national  ends  and  the  whole  resources  of  the  country  directed  to 
promoting  the  material  prosperity  and  social  well-being  of  all  classes  of 
the  population. 

72.  If  we  can  accomplish  this  we  shall  not  merely  have  dealt  success- 
fully with  the  situation  created  by  the  war.  We  shall  have  removed  the 
most  serious  obstacle  to  industrial  and  social  development.  That  the 
nation  should  recuperate  quickly,  that  the  national  plant  should  be  restored, 
that  capital  should  be  plentiful,  that  labour  should  be  efficient — these 
things  are  necessary  in  order  that  we  may  avert  a  threatened  danger.  To 
secure  industrial  peace  on  terms  just  and  honourable  to  both  sides  would 
be  to  double  the  national  strength  whether  in  industry  or  in  citizenship. 

73.  It  is  obvious  that  much  will  be  gained  if  we  can  frame  the  meas- 
ures adopted  for  meeting  the  Emergency  Problem  in  such  a  way  as  will 
lay  the  foundations  of  permanent  reconstruction.  By  so  doing  we  shall 
wring  a  definite  good  out  of  the  evils  with  which  we  are  faced,  and  we 
shall  have  a  double  claim  on  all  classes  for  co-operation,  and  if  necessary 
for  concessions — that  they  may  thereby  both  save  themselves  from  threat- 
ened ruin  and  look  forward  to  a  positive  gain. 

74.  In  order  to  deal  effectively  with  either  the  Emergency  or  the 
Constructive  Problem,  it  is  essential  to  keep  in  mind  that  both  are  dual 
in  their  nature, 

75.  On  the  one  hand  are  the  direct  economic  effects  of  the  war,  the 
difficulties  of  demobilisation  and  readjustment,  and  the  diminution  of  the 
national  income  by  deterioration  of  plan,  loss  of  workers,  and  wastage  of 
capital.  These  effects  can  be  dealt  with  by  special  measures  framed  with 
a  view  to  meeting  specific  dangers.     Some  of  these  measures  will  be  of  an 

28 


emergency  character,  having  for  their  object  to  carry  us  through  the  period 
of  transition  with  a  minimum  of  suffering  and  friction.  Others  will  be 
of  a  more  constructive  kind,  intended  to  increase  our  general  industrial 
efficiency  and  so  to  neutralise  the  more  lasting  results  of  the  war  in  the 
direction  of  diminished  production  and  reduced  earnings. 

76.  On  the  other  hand,  there  is  the  fundamental  problem  of  Indus- 
trial Unrest,  which  may  be  aggravated  and  brought  to  a  head  by  the  effects 
of  the  war,  but  has  its  roots  far  back  in  pre-war  conditions.  It  can  be 
solved  only  by  a  much  broader  and  more  far-reaching  treatment,  based 
upon  a  survey  not  of  the  accidental  circumstances  of  the  moment,  but  of 
the  permanent  factors  of  our  industrial  life.  Unless  this  problem  is  suc- 
cessfully solved,  no  other  steps  which  may  be  taken  can  be  relied  upon 
either  to  avert  the  immediate  crisis  or  to  ensure  the  future  prosperity  of 
Industry. 

77.  Many  of  the  detailed  questions  bearing  upon  the  work  of  readjust- 
ment and  reconstruction  are  already  the  subject  of  investigation  by  Gov- 
ernment Departments,  by  well-equipped  societies,  or  by  groups  of  men 
having  expert  knowledge  and  practical  experience.  It  is  well  that  this  work 
should  be  done  by  those  who  have  special  equipment  for  dealing  with  its 
various  phases.  But  two  things  require  to  be  kept  constantly  in  mind. 
First:  No  single  detailed  measure,  however  important  in  itself  and  how- 
ever thoroughly  it  is  worked  out,  will  form  a  substitute  for  clear  thinking 
with  regard  to  the  essential  principles  of  industrial  life  and  a  united  effort 
by  those  concerned  to  give  them  fuller  expression  in  their  joint  activities. 
Secondly,  it  is  essential  to  avoid  clashing  or  overlapping  by  the  various 
movements  represented  and  to  give  the  work  of  each  its  proper  place  and 
perspective  in  the  wide  scheme. 

78.  For  the  above  reasons  we  propose  to  do  little  more  than  indicate 
a  number  of  the  more  important  matters  which  require  study  with  a  view 
to  neutralising  the  direct  effects  of  the  war,  reserving  for  more  extended 
treatment  in  our  final  section  the  fundamental  problem  which  is  both  the 
most  important  and  the  least  recognised. 

II.     EMERGENCY  MEASURES 

(t)     Demobilisation 
(a)  The  Fi.nw.xu  ok  Jobs 

79.  It  has  been  shown  that  the  probable  cause  of  unemployment  after 
the  war  will  be,  not  the  lack  of  a  demand  for  labour,  but  the  difficulty  of 
bringing  together  the  workman  and  the  job.  A  nucleus  of  the  requisite 
machinery  is  provided  by  the  Employment  Department  of  the  Board  of 
Trade;  but  the  emergency  will  call  for  operations  far  beyond  the  scope 
of  the  existing  organisation.  The  creation  of  joint  committees,  represent- 
ing Employers,  the  Trade  Unions  and  Labour  generally,  working  in  con- 
junction with  the  Board  of  Trade,  will  give  the  best  hoi^e  of  obtaining  the 
necessary  knowledge  as  to  the  conditions  of  demand  in  particular  localities 

29 


and  trades.  It  should  be  possible  for  the  Government  to  obtain  a  complete, 
or  approximately  complete,  register  of  the  previous  occupations  and  capac- 
ities of  the  men  to  be  disbanded.  A  Central  Conference  composed  of  rep- 
resentatives of  the  State,  Employers  and  Labour,  working  on  the  knovs^ledge 
thus  obtained,  would  be  in  a  position  to  co-ordinate  the  work  of  the  various 
committees  and  of  the  Labour  Exchanges,  and  to  direct  the  stream  of 
demobilised  men  towards  these  districts  and  industries  where  the  prob- 
ability of  immediate  reinstatement  or  absorption  was  greatest.  So  far  as 
military  exigencies  will  permit,  it  is  very  desirable  that  workers  for  whose 
services  there  is  an  assured  need  should  be  the  first  to  be  disbanded,  and 
that  .an  early  discharge  should  be  given  to  those  for  whom  situations  are 
actually  waiting.  Above  all,  it  is  vitally  necessary  that  the  preliminary 
work  of  investigation  and  the  creation  of  machinery  sho-uld  be  pushed 
rapidly  forward,  in  order  that  there  may  be  no  delay  or  uncertainty  in 
taking  action  when  the  time  comes  for  disbandment. 

80.  Even  with  the  most  complete  machinery  that  can  be  devised,  it  is 
difficult  to  see  how  a  certain  amount  of  temporary  unemployment  can  be 
avoided  if  we  are  content  to  rely  entirely  upon  the  ordinary  course  of 
relations  between  demand  and  supply.  This  margin  of  unemployment 
could,  however,  be  largely  reduced  if  not  extinguished,  by  State  and  Munic- 
ipal expenditure  upon  works  of  public  utility.  Such  a  policy  will  need 
to  be  carried  out  with  care  and  closely  watched  from  the  standpoint  both 
of  public  economy  and  industrial  conditions.  Employment  of  this  nature 
can  never  form  a  permanent  substitute  for  that  arising  from  industrial 
activity  and  it  would  be  worse  than  folly  to  keep  men  engaged  upon  Gov- 
ernment or  Municipal  work  when  the  industries  of  the  country  were  ready 
to  receive  them.  All  such  work  should,  therefore,  be  undertaken  in  close 
co-operation  with  the  Employment  Department  of  the  Board  of  Trade  and 
the  local  Committees  representing  Employers  and  Employed.  It  should 
also  be  confined  to  work  of  definite  utility  and  as  far  as  possible  to  undei*- 
takings  of  a  productive  nature  or  connected  with  the  restoration  of  the 
national  plant.  At  the  same  time  it  would  be  legitimate  to  anticipate  to 
some  extent  work  intended  to  be  done  in  the  near  future,  in  order  to  give 
employment  at  the  moment  when  it  is  most  required.  There  is  a  large 
amount  of  really  valuable  work  to  be  done  in  connection  with  housing,  the 
repair  and  improvement  of  roads,  afforestation,  the  reclamation  of  waste 
land,  etc.,  which  would  prove  a  sound  investment  both  from  the  social 
and  economic  points  of  view,  and  which  the  training  of  the  returned  soldiers 
in  trench  warfare  would  have  fitted  them  to  accomplish  efficiently. 

(h)  The  Assuring  op  Decent  Wage 

81.  We  shall  undoiibtedly  have  to  meet  a  demand  that  men  returning 
to  civil  life  shall  be  placed  in  a  position  no  worse  than  that  which  they 
occupied  before  the  war.  Since  the  cost  of  living  has  risen  and  will  remain 
high,  this  will  involve  a  demand  for  proportionately  increased  wages.  In 
the  case  of  men  who  have  been  guaranteed  re-implacement,  it  is  desirable 

30 


that  employers  should  take  this  change  of  conditions  into  sympathetic 
consideration.  Men  who  do  not  return  to  a  specific  job,  but  who  work  at  a 
staple  trade  will,  of  course,  look  for  the  standard  rate  of  wages  current  at 
the  date  of  their  return.  Any  attempt  to  use  ex-service  men  as  a  means 
of  substituting  the  old  rates  of  wages  for  those  which  have  been  granted 
to  meet  the  increased  cost  of  living,  would  certainly  arouse  resentment 
and  might  very  well  give  rise  to  serious  trouble. 

82.  In  the  case  of  those  trades  in  which  organisation  is  but  feeble  and 
in  which  standard  rates  of  pay  can  hardly  be  said  to  exist,  it  is  probable 
that  improvement  could  be  secured  by  the  application  to  them  of  the  Trade 
Boards  Act.  Experience  has  shown  that  the  fixing  of  minimum  rates  under 
this  Act  has  had  a  beneficial  effect  on  the  wages  paid,  and  that  the  increases 
so  secured  have  raised  the  workers  affected  just  above  that  margin  where 
they  become  capable  of  organising  and  securing  fair  conditions  of  employ- 
ment for  themselves.  The  fixing  of  minimum  rates  in  certain  trades  has 
also  had  a  stimulative  effect  upon  workshop  management  in  those  numerous 
cases  where  the  methods  and  organisation  were  such  as  to  leave  room  for 
an  improvement  out  of  which  the  increased  labour  charge  could  be  recouped. 
Direct  legislative  action  of  this  character  could  be  taken  in  addition  to  no 
less  important  measures  for  the  training  of  those  who  are  employed  in,  or 
might  otherwise  enter,  low  paid  occupations — measures  which  are  not  only 
of  direct  value  to  those  immediately  affected,  but  ialso  of  indirect  value  in 
mitigating  the  rigour  of  competition  among  the  remainder.  A  minimum 
Wage  law  is  a  powerful  instrument  for  achieving  improvement  and  should 
not  be  neglected,  but  it  is  well  to  recognise  that  its  indiscriminate  applica- 
tion might  be  attended  by  certain  risks.  There  is  in  many  trades  a  margin 
of  unexhausted  possibilities  which  a  wisely  fixed  minimum  wage  would  do 
much  to  utilise.  Beyond  such  a  margin  a  minimum  wage  would  represent 
an  increase  in  the  cost  of  production  and  selling  prices,  and  might  simply 
become  a  tax  on  the  community  as  a  whole  for  the  benefit  of  the  workers 
in  the  particular  trade. 

83.  The  whole  question  of  wages  is  very  closely  related  to  the  larger 
problem  of  Industrial  Unrest.  If  the  mutual  hostility  of  Emploj'ers  and 
Employed  can  be  replaced  by  a  spirit  of  co-operation  based  on  mutual 
understanding  and  agreement,  there  will  be  less  likelihood  of  friction  over 
details  of  the  wage  question  and  a  better  chance  of  an  all  round  improve- 
ment in  the  conditions  of  workers,  due  to  increased  efficiency  in  production. 

(c)  Settling  Men  on  the  Land 

84.  The  settlement  of  returned  soldiers  on  the  land  is  desirable  from 
many  points  of  view.  It  might  retain  in  this  country  men  imwilling  to 
return  to  sedentary  occupations,  who  would  otherwise  emigrate;  and,  if 
successful,  would  tend  to  render  the  country  more  self-supporting  and  to 
improve  the  national  physique.  It  would,  therefore,  conduce  both  to  the 
efficiency  of  national  defence  and  to  social  welfare.  The  respective  advan- 
tages   of    State,    local    and    co-operative    settlements,    the    desirability    of 

31 


ownership  or  tenancy  of  small  holdings — all  these  matters  are  already 
receiving  the  careful  attention  of  experts.  It  is  doubtful,  however,  whether 
svifRcient  consideration  has  been  given  to  the  question  whether  the  end 
desired  can  be  best  attained  by  organised  settlement  of  individuals  or 
groups  on  created  holdings  or  by  so  promoting  the  prosperity  of  agriculture 
generally  and  its  status  as  an  occupation,  that  men  will  be  drawn  to  it  by 
economic  and  social  attractions.  Probably  both  means  may  usefully  be 
employed,  and  attention  should  not  be  concentrated  on  one  to  the  exclusion 
of  the  other.  The  problem  of  agricultural  credit,  whether  on  a  co-opera- 
tive basis  or  otherwise,  is  an  important  phase  of  the  general  question  of 
land  settlement,  which  must  not  be  overlooked. 

(d)  Teaching  Men  Trades 

85.  In  the  reinstatement  of  demobilised  men  and  the  adjustment  of 
labour  to  the  new  conditions,  large  numbers  of  skilled  workers  may  find 
themselves  compelled  to  seek  employment  in  trades  for  which  they  have 
not  been  trained.  To  allow  these  men  to  sink  into  the  ranks  of  unskilled 
labour  would  be  manifestly  unfair  to  them  and  harmful  to  the  community. 
It  will,  therefore,  be  necessary,  as  soon  as  the  Board  of  Trade  Employment 
Department  is  able  to  forecast  with  some  accuracy  the  directions  in  which 
demand  is  likely  to  be  brisk,  to  make  preparations  for  teaching  men  those 
trades  in  which  there  is  the  best  prospect  of  employment.  Of  less  economic 
imiiortance,  but  a  debt  of  honour  which  the  nation  must  not  forget  to  pay, 
is  the  obligation  to  teach  men  who  are  prevented  by  partial  disablement 
from  following  their  old  occupations,  some  trade  within  their  present 
capacity. 

(e)  The  New  Workshops 

86.  Although  the  plant  normally  employed  in  many  industries  has 
been  allowed  to  fall,  to  some  extent,  into  disrepair,  a  great  deal  of  new 
plants  have  been  created  for  the  purpose  of  making  munitions.  Much  of 
this,  though  unfortunately  by  no  means  all,  is  convertible  for  the  purposes 
of  civil  industry.  Part  of  this  plant  is  in  the  hands  of  private  owners  who 
will,  in  the  ordinary  course  of  business,  make  the  utmost  possible  use  of 
it  for  industrial  purposes.  Much  of  it,  however,  is  in  the  new  factories 
and  workshops  owned  by  the  State.  Of  these  some  may  be  permanently 
retained  by  the  Government  for  the  manufacture  of  war  material.  With 
regard  to  the  rest,  it  will  be  a  question  how  far  they  should  remain  under 
State  control,  how  far  they  should  be  sold  to  private  firms.  The  former 
course  would  not  necessarily  involve  the  entry  of  the  State  into  com- 
petitive industry.  The  new  workshops  could  be  used  for  the  manu- 
facture of  plant  and  appliances  used  in  the  work  of  Government 
Departments,  such  as  telephone,  telegraph  and  Post  Ofilce  equipm,ent. 
Since  this  course  would  involve  the  maintenance  of  a  permanent  staff,  it 
would  not  perform  the  function  of  steadying  general  employment  or  pro- 
viding temporary  relief  during  the  period  of  transition.  But  it  might 
enable  the  Government  to  offer  immediate  and  j)ermanent  employment  at 

32 


standard  wages  to  some  demobilised  men  who  had  lost  their  jobs  and 
were  prepared  to  undergo  training  for  new  tasks.  It  is  at  least  possible, 
however,  that  sale  to  private  enterprise  would  result  in  more  efficient  use 
being  made  of  the  plant.  The  knowledge  acquired  departmentallj-  as  to 
the  adequacy  of  existing  plant  in  the  various  industries  to  meet  probable 
requirements  may  be  used  as  a  guide  in  considering  the  question  of  transfer. 
In  many  cases  it  is  probable  that  the  cost  of  conversion  would  be  such 
as  to  make  economical  working  impossible,  and  it  will  be  necessary  to  be 
careful  lest  reluctance  to  scrap  State  owned  property  should  result  in  ill- 
advised  and  wasteful  attempts  to  use  it  for  the  fulfilment  of  Government 
orders. 

87.  On  the  cessation  of  hostilities,  it  will  be  possible  gradually  to 
reduce  the  production  of  munitions  and  military  material  to  a  peace  level. 
There  will,  however,  be  an  immense  vis  inertiae  to  be  overcome,  tending  to 
keep  a  high  proportion  of  our  productive  power  engaged  for  months  after 
the  war  on  munition  work.  It  is  not  easy  suddenly  to  stop  or  divert  the 
activities  of  so  powerful  and  so  highly  organised  a  machinery  as  that  con- 
trolled by  the  Ministry  of  Munitions.  Many  firms  will  be  interested  in 
the  continuance  of  profitable  contracts.  Many  people  will  be  interested  in 
the  retention  of  secure  and  well-paid  employment.  There  will  be  a  natural 
tendency  to  continue  automatically  the  expenditure  of  unexpended  votes. 
Varying  estimates  will,  no  doubt,  be  formed  as  to  the  proper  standard  of 
peace  requirements.  At  the  same  time,  it  is  essential  that,  without  prej- 
udicing the  requirements  of  national  defence,  we  should  act  promptly  and 
vigorously  in  switching  off  munition  work,  scrapping  what  is  half-done  and 
re-adapting  our  industrial  plant  to  the  uses  of  peace.  In  all  the  metal 
industries  there  will  be  an  abundance  of  orders  waiting  for  execution  and 
it  depends  upon  the  rapidity  with  which  we  effect  this  transference  of  effort 
whether  we  get  these  orders  before  they  have  gone  elsewhere. 

(ii)     The  Exodus  from  the  War  Industries 

88.  The  problem  of  providing  peace  employment  for  those  who  have 
acted  during  the  war  as  stop-gap  and  emergency  workers  will  be  of  less 
magnitude  than  that  of  reinstating  the  returned  soldiers;  but  it  will  none 
the  less  be  a  formidable  one.  We  have  seen  (paragraph  19)  that  the  total 
number  affected  will  probably  fall  little  short  of  a  million  and  a  half,  about 
half  of  whom  will  be  women  and  girls.  This  total  may  be  divided  into 
several  classes,  both  as  regards  the  nature  of  their  employment  and  the 
problem  which  they  will  present  on  a  return  to  peace  conditions. 

89.  The  necessities  of  the  war  have  resulted  in  the  employment  of  a 
large  number  of  additional  workers  in  the  munition,  equipment,  chemical 
and  other  industries,  either  for  the  purpose  of  making  material  of  war  or 
to  supply  the  exceptional  demand  for  labour  created  in  certain  trades  by 
the  circumstances  of  wartime,  such  as  the  cutting  off  of  imports  from 
abroad.  The  great  majority  of  these  have  left  other  employments,  cither 
because  trade  was  slack  in  their  own  line,  or  because  of  the  higher  rcmuner- 

33 


ation  or  greater  attractiveness  of  war  work.  Most  of  those  who  have  done 
so  may  be  expected  to  gravitate  back  to  their  former  occupations;  but  not 
all  will  find  it  possible  to  gain  immediate  reinstatement.  A  large  section 
consists  of  married  women,  more  particularly  of  women  whose  husbands 
are  with  the  Colours,  who  have  returned  to  industry  during  the  war.  The 
majority  of  these  W'ill  doubtless  return  to  domestic  life;  but  many  of  them 
may  be  compelled  to  continue  as  wage  earners,  or  may  desire  to  do  so.  A 
further  section  consists  of  girls,  who  would,  in  the  normal  course,  have 
entered  industry  during  the  period  of  the  war,  and  whose  circumstances  will 
certainly  require  them!  to  seek  other  paid  occupations  when  their  war  em- 
ployment has  come  to  an  end. 

90.  In  addition  to  those  who  have  been  added  to  the  number  employed 
on  special  industries,  many  w-omen  have  gone  into  factories,  shops  and  offices, 
to  take  the  place  of  enlisted  men.  A  large  proportion  of  these  are  young 
women  who  would  not,  in  the  ordinary  course,  have  sought  for  paid  employ- 
ment. Here  again,  it  is  probable  that  a  certain  number  will  withdraw  from 
industry  when  the  national  emergency  is  passed,  but  that  a  large  number 
will  remain  as  w^age  earners,  either  from  necessity  or  from  preference. 
There  are  also  a  considerable  number  of  former  domestic  servants,  some 
of  whom  will  desire  to  retain  the  greater  freedom  and  higher  remuneration 
of  their  new  occupations.  Such  women,  whether  they  have  taken  the  place 
of  enlisted  men  or  have  been  employed  on  munition  work,  will  present  a 
difficult  problem;  for  they  have  had  no  pre-war  industrial  training  and  the 
instruction  which  they  have  received  in  the  performance  of  specialised 
tasks  will  not  be  of  much  service  in  securing  employment  when  war  work 
comes  to  an  end,  or  the  men  whom  they  have  released  return.  It  is  prob- 
able that  a  more  scientific  organisation  of  office-staffs  may  find  a  permanent 
place  for  some  of  those  who  have  entered  on  commercial  life;  but  the 
greater  number  of  these  new  workers  will  have  to  look  for  industrial 
employment,  and  unless  a  satisfactory  method  of  dealing  with  the  difficulty 
can  be  found,  there  is  grave  danger  of  their  drifting  into  the  lowest  grades 
of  unskilled  labour  or  the  ranks  of  the  unemployed. 

91.  Finally,  there  remains  the  problem  of  boy  and  girl  labour.  During 
the  war,  many  children  have  become  wage-earners  before  arriving  at  the 
statutory  working  age,  and  have  been  put  to  work  in  which  they  have  no 
future,  and  are  receiving  very  little  instruction  of  general  utility.  In  the 
case  of  these  juvenile  workers  the  primary  necessity  is  to  make  good  the 
interruption  of  their  education,  both  general  and  vocational. 

92.  The  general  situation  with  regard  to  stop-gap  and  emergency 
workers  will  be  somewhat  relieved  by  the  fact  that  many  women  who  would 
normally  have  quitted  industry  for  domestic  life  have  deferred  doing  so 
until  after  the  war.  The  places  vacated  by  them  will  be  available  for  those 
who  are  returning  to  ordinary  employment  from  the  war  industries.  In 
the  main,  however,  the  problem  is  similar  to  that  of  demobilisation,  and 
must  be  treated  on  the  same  lines.  As  in  the  case  of  returned  soldiers, 
the  transition  nuiy  be  eased  by  Government  orders  for  reconstruction  work 

34 


and  for  undertakings  of  national  utility.  The  special  difficulties  presented 
by  the  case  of  the  new  women  workers,  with  no  previous  industrial  training, 
and  the  boy  and  girl  labour  taken  on  for  war  purposes,  will  require  separate 
treatment.  The  only  way  in  which  these  workers  can  be  raised  above  the 
level  of  unskilled  Labour  or  assured  permanent  work,  is  by  the  adoption 
of  a  comprehensive  policy  of  technical  and  vocational  education,  directed 
to  fitting  them  for  those  trades  in  which  there  are  the  best  prospects  of 
employment. 

(in)     Industrial  Friction 

93.  Whatever  emergency  measures  may  be  adopted,  the  avoidance  of 
friction  depends  upon  an  agreement  between  Labour,  Management  and 
Capital  as  to  the  future  organisation  of  industry.  Such  an  agreement  must 
be  based  on  frank  recognition  of  the  existing  grievances  of  all  parties  and 
can  only  be  attained  by  bringing  home  to  the  minds  of  each  class  the 
dangers  arising  from  conflict  and  the  advantages  to  be  gained  by  co-opera- 
tion. The  possibility  of  such  an  agreement  will  be  discussed  in  the  con- 
cluding section  of  this  Memorandum. 

III.— CONSTRUCTIVE  MEASURES 

(i)     Industrial  Efficiency 

94.  The  first  essential  of  Industrial  Efficiency  is  the  will  to  produce, 
which  can  only  be  obtained  by  providing  sufficient  incentive  and  promot- 
ing confidence.  It  is,  therefore,  dependent  upon  a  satisfactory  solution  of 
the  fundamental  problem. 

Subject  to  the  satisfaction  of  this  primary  requisite,  miicli  may  be 
done  to  promote  efficiency  by  an  all  round  improvement  in  our  industrial 
organisation.  A  number  of  practical  steps  in  this  direction  are  suggested 
below. 

(a)  PiivsiCAL  Efficiency 

95.  The  basis  of  all  national  progress,  whether  industrial  or  social, 
is  the  health  and  physical  efficiency  of  the  people.  Any  improvement  in 
this  respect  must  be  sought  along  two  lines — the  improvement  of  conditions 
and  the  spread  of  knowledge.  The  conditions  which  exist  at  present  in 
the  over-crowded  areas  of  our  towns  and  in  many  of  our  villages  render 
healthy  life  impossible.  The  progress  of  physical  degeneracy  must  be 
arrested  by  increased  attention  to  the  care  of  child  life,  the  improving  of 
housing  conditions,  both  in  town  and  country,  aiid  the  creation  of  open 
spaces.  These  steps  are  essential,  not  merely  to  the  efficiency  of  the  work- 
ing class,  but  to  the  health  and  character  of  the  nation.  Closely  connected 
with  this  question  is  that  of  healthful  conditions  of  work.  Not  only  justice 
and  humanity,  but  sheer  economic  necessity,  should  prompt  us  to  enforce 
strictly  all  regulations  of  factory  and  other  work  in  tlie  iuterests  of  health, 
cleanliness  and  decency.    It  is  equally  important  that  ample  opportunities 

35 


and  facilities  should  be  afforded  to  all  industrial  workers  for  rest,  recrea- 
tion and  exercise.  Neither  efficient  workers  nor  healthy  and  self-respecting 
citizens  can  be  obtained  if  any  part  of  the  community  is  denied  access  to 
the  materials  of  social  life.  The  assurance  of  a  minimum  standard  of 
maintenance,  enabling  sufficient  food  and  clothing  to  be  provided  for  every 
member  of  a  family,  is  bound  up  with  the  question  of  wages  and  must  be 
taken  into  account  in  any  consideration  of  that  question.  While  the  dif- 
ficulties in  the  way  of  establishing  a  general  minimum  wage  by  State  action 
are  great  and  probably  prohibitive,  the  wage  rates  in  any  trade  should  bear 
a  definite  relation  to  the  cost  of  living.  A  healthy  public  opinion  and  the 
common  sense  of  employers  should  both  be  brought  to  bear  upon  the  dangers 
arising  from  an  inadequate  standard  of  life.  To  ensure  full  value  being 
received  for  the  money  spent  on  food,  the  laws  against  adulteration  should 
be  strengthened  both  in  their  provisions  and  enforcement.  Adulterated 
food  and  impure  milk  are  still  responsible  for  much  malnutrition.  All 
these  questions  of  conditions  are  fundamental,  and  unless  they  are  attended 
to,  we  can  look  for  no  great  progress;  but  in  order  to  obtain  the  best  results 
a  simultaneous  effort  must  be  made  to  extend  knowledge  and  training.  The 
work  already  done  in  the  schools  in  the  direction  of  physical  training  and 
the  teaching  of  elementary  hygiene,  is  excellent;  but  with  greater  national 
attention  to  these  subjects,  resulting  in  further  financial  provision,  it  could 
be  largely  extended.  The  same  remark  applies  to  the  teaching  of  domestic 
economy.  While  the  workers  are  rightly  suspicious  and  resentful  of 
grandmotherly  interference,  an  infinite  amount  of  waste  and  loss  could  be 
saved  by  spreading  among  all  classes  a  sounder  knowledge  of  how  to  lay 
out  the  family  income  and  employ  the  domestic  equipment  so  as  to  obtain 
the  best  return.  Xo  class  is  free  from  the  reproach  of  wasteful  expenditure 
and  inefficient  methods  and  a  knowledge  of  simple  facts  in  elementary 
economics  should  form  part  of  the  teaching  in  all  schools. 

(h)  AIextal  axd  Manual  Efficiency — The  Proiary  Schools 

96.  The  foundations  of  mental  and  manual  efficiency  must  be  laid  in 
the  primary  schools.  There  is  observable  among  some  industrials  a  recur- 
ring tendency  to  regard  all  but  the  barest  rudiments  of  general  education 
as  useless  and  even  injurious  to  the  average  run  of  working-class  children, 
and  to  urge  that  at  an  early  age  all  but  the  most  promising  shoidd  be 
trained  solely  with  a  view  to  fitting  them  for  a  specific  occupation.  This 
course,  however,  is  open  to  serious  objections,  both  from  the  social  and 
from  the  industrial  point  of  view.  The  effects  of  technical  instruction  at  a 
very  early  age  are  undoubtedly  injurious  to  mental  development.  It  must 
inevitably  be  acquired  mechanically  and  without  understanding,  and  the 
cramping  effect  of  a  purely  utilitarian  education  upon  intelligence  and 
character  renders  it  a  poor  preparation  even  for  industrial  life.  From  the 
social  standpoint  there  are  grave  disadvantages,  both  to  the  working  class 
and  to  the  community  as  a  whole,  in  restricting  the  education  of  any  chil- 
dren to  their  training  as  operatives.     At  the  same  time,  the  connection 

36 


between  the  general  education  given  in  primary  schools  and  industrial 
efficiency  is  close,  and  may  be  rendered  still  closer.  The  modem  educational 
systems,  which  aim  at  fostering  the  child's  intelligence  and  developing  its 
powers  of  self-expression,  even  more  than  at  impairing  instruction,,  can  be 
made  to  form  the  best  possible  basis  for  subsequent  specialised  training. 
At  present  the  elementary  schools  still  suffer  to  some  extent  from  the  pres- 
sure of  sterotyped  codes^  laying  an  undue  emphasis  on  "book-learning," 
and  the  development  of  the  child-mind  is  too  often  choked  by  cramming  in 
the  upper  standards.  What  is  wanted  is  not  that  those  who  have  the  wel- 
fare of  the  industrial  class  at  heart  should  seek  to  limit  the  time  and 
attention  given  to  general  education,  but  that  they  should  ally  themselves 
with  those  educational  reformers,  within  the  schools  as  well  as  outside  them, 
who  are  striving  to  simplify  the  curriculum  and  to  lay  increased  emphasis 
on  the  formative  side  of  education.  Special  attention  should  be  given  to 
that  part  of  the  course  which  is  devoted  to  bringing  out  the  child's  powers 
of  observation  and  placing  it  in  an  intelligent  relation  with  its  environ- 
ment. The  "eye  and  hand  training,"  which  already  forms  a  large  part  of 
the  work,  is  capable  of  great  extension.  To  confine  it  to  preparation  for 
any  particular  trade  would  be  to  rob  it  of  most  of  its  educational  and  much 
of  its  industrial  value.  Its  purpose  is  to  perfect  the  instrument  of  which 
subsequent  vocational  training  will  teach  the  use.  Experience  shows  that 
instruction  in  any  subject  is  acquired  more  quickly  and  more  thoroughly 
if  it  is  postponed  until  the  mind  and  senses  of  the  child  have  been  thor- 
oughly and  painstakingly  prepared  to  receive  it.  Education  along  these 
lines  will  produce  at  the  same  time  efficient  workers  and  intelligent  citizens; 
and  the  development  of  the  commercial  and  team  spirit  by  the  organised 
games  which  are  coming  more  and  more  into  favour,  will  play  its  part  in 
both  these  relations.  Our  hope  for  the  future  must  lie  largely  in  co- 
operation between  the  industrialists  and  sociologists,  who  can  best  indicate 
the  national  requirements,  and  the  practical  educationalists  who  are  entitled 
by  training  and  experience  to  indicate  the  methods  of  attaining  them. 

(c)  Mental  and  Manual  Efficiency — Continuation  Education 

97.  The  work  of  the  primary  schools  must  be  carried  forward  and 
developed  by  the  improvement  of  our  system  of  Continuation  Education. 
There  is  no  greater  source  of  national  waste  than  that  which  takes  place 
by  the  premature  withdrawal  of  our  children  from  school  life,  just  at  the 
age  when  they  are  best  fitted  to  profit  by  it.  The  figures  in  this  respect 
are  so  startling  that  they  are  worth  quoting.  In  England,  out  of  two  and 
three-quarter  million  boys  and  girls  between  the  ages  of  12  and  16,  nearly 
1,100,000  get  no  further  education  after  the  age  of  thirteen.  Of  the  remain- 
ing 1,650,000,  the  great  bulk  are  educated,  mostly  in  the  elementary  school, 
only  until  the  age  of  fourteen.  Only  250,000,  or  one  in  eleven,  go  to  proper 
secondary  schools,  and  in  most  cases  they  are  there  only  for  a  short  time. 
These  figures  make  it  easy  to  understand  the  superior  success  of  Germany 
in   so   many   departments    of    activity.      That   success    is   not    due   to    the 

60750 


character  of  the  education  received  by  young  people  in  Germany.  It  is 
due  to  the  fact  that  so  very  much  greater  a  proportion  of  young  people  in 
that  country  receive  any  systematic  education  at  all  during  the  all- 
important  years  between  14  and  18.  The  same  is  true  of  University  educa- 
tion which,  whatever  its  quality,  is  far  more  widely  diffused  in  Grermany 
than  in  this  countO'.  Both  for  the  sake  of  the  future  of  British  Industry 
and  from  the  point  of  view  of  the  development  of  intelligent  citizens,  it  is 
essential  that  means  should  be  found  by  which  general  education  can  be 
continued  after  the  close  of  the  primary  school  period.  This  is  the  more 
important  because  the  conditions  of  modern  industry  are  such  as  to  make 
it  impossible  to  rely  on  apprenticeship  as  a  generally  satisfactory  method 
of  industrial  training.  The  methods  of  attaining  the  desired  end  remain  to 
be  considered. 

Evening  Glasses. — Continuation  education  in  this  country  has  for 
many  years  past  existed  in  the  form  of  evening  schools.  These  have 
rendered  much  good  service,  but  attendance  has  been  voluntary  and  the 
number  of  students  has  always  been  small  in  proportion  to  the  whole 
number  of  juveniles  employed  in  industry.  Moreover,  attendance  at  an 
evening  school  for  one,  two,  or  more  hours,  after  a  9V2-hour  day  in  the 
works,  puts  a  heavy  strain  on  mind  and  body,  and  in  the  case  of  the  keenest 
and  most  promising  youths,  has  often  resulted  in  complete  breakdown. 
Evening  classes  are  thus  open  to  serious  objection  and  further  progress 
can  hardly  be  expected  from  a  development  of  the  system. 

Part-Time  Day  Schools. — The  method  of  evening  schools  having  been 
found  unsatisfactory,  it  should  be  replaced  by  a  system  of  compulsory  part- 
time  day  Continuation  Schools  for  all  young  persons  between  14  and  18 
who  are  not  receiving  whole-time  education.  Employers,  as  a  whole,  miust 
be  required  to  follow  the  example  already  set  by  many  among  their  number, 
who  allow  their  young  employees  a  substantial  period  every  week  for  attend- 
ance at  school.  These  Continuation  Schools,  if  they  are  to  do  the  best  for 
their  puipls,  must  not  be  purely  technical  or  specialised  in  character,  but 
must  continue  the  general  civic  education  from  the  point  where  it  was 
left  at  the  primary  school,  and  must  lay  due  stress  on  the  physical  side  of 
development  and  on  the  corporate  life,  which  is  the  essence  of  the  "public- 
school  spirit"  in  the  schools  of  the  well-to-do  for  boys  of  the  same  age. 
Education  at  this  stage  must  still  be  primarily  formative  in  its  purpose: 
and  it  is  because  British  schools  of  the  older  type  have  always  kept  this 
larger  aim  steadily  in  view  that  they  have  developed  the  qualities  of 
adaptability  and  initiative  which  the  war  has  revealed.  The  true  period 
for  specialisation  and  the  perfecting  of  industrial,  as  of  professional  train- 
ing, is  after  the  age  of  18,  for  it  is  only  then  that  most  young  people 
become  fixed  in  what  is  likely  to  be  a  life-long  occupation,  and  have  the 
necessary  knowledge  and  general  equipment  to  understand  the  bearings  of 
the  special  work  which  falls  to  their  lot.  For  this  specialised  training 
the  part-time  school,  with  skilled  craftsman  teachers,  affords  the  best 
opportunity.     The  combination   of  vocational   instruction   in   the  case   of 

38 


younger  pupils,  who  have  developed  a  special  bent  towards  any  particular 
craft,  with  the  continuation  of  their  general  education,  is  already  provided 
for,  to  some  extent,  by  the  Junior  Technical  Schools  which  have  been 
established  in  many  of  our  large  towns. 

The  Universities. — Much  more  could  also  be  done  to  bring  the 
University  life  of  the  country  into  closer  touch  with  the  professional  and 
industrial  classes.  A  University  should  not  only  be  a  training  ground  for 
the  recognised  professions,  but  a  centre  of  research  in  connection  with  the 
industries  of  the  country.  Moreover,  it  has  a  distinctive  and  peculiar 
part  to  play  in  what  has  come  to  be  termed  the  work  of  adult  education. 
It  should  form  a  meeting  place  for  those  engaged  in  every  department  of 
life,  and  the  natural  home  of  the  thought  and  discussion  of  the  country 
on  public  affairs.  Used  in  this  spirit,  the  Universities  should  go  far  to 
redeem  the  country  from  the  shallow  and  sectional  discussions  which  have 
disturbed  it  in  recent  years. 

{d)  Labour-Saving  Machixery 

98.  There  is  no  question  that  an  increase  in  the  industrial  output 
could  be  obtained  by  a  wider  utilisation  of  labour-saving  machinery. 
From  the  Employers'  point  of  view,  the  cost  of  an  improvement  of  this  kind 
in  existing  plant  would  be  repaid  in  a  very  short  period  and  would  yield 
a  high  return  on  the  capital  invested.  The  Workman,  however,  usually 
resists  and  obstructs,  or,  at  any  rate,  resents  its  introduction,  and  before 
such  extension  can  be  advocated  as  an  item  in  the  programme  of  recon- 
struction, the  grounds  of  this  opposition  must  be  examined  from  the  point 
of  view  of  the  Men  as  well  as  of  the  Employer. 

99.  The  strongest  form  assumed  by  this  hostility  rests  upon  a  human 
and  not  upon  an  economic  basis.  It  arises  from  a  profound  dislike  of 
seeing  handicraft  replaced  by  the  machine  and  the  craftsman  relegated  to 
the  position  of  a  machine  minder.  The  argument  that  the  use  of  automatic 
machines  will  increase  output  leaves  this  objection  untouched,  because  the 
question  is  not  one  of  the  worker's  remuneration,  but  of  his  position  and 
self-respect.  The  tendency  of  work  under  modern  conditions  to  become  a 
mere  mechanical  routine  and  of  the  worker  himself  to  become  dehumanised 
during  his  hours  of  labour  is  at  the  bottom  of  the  wide-spread  intellectual 
revolt  against  the  industrial  system.  This  feeling  is  not  only  a  natural 
one,  but  is  based  upon  sound  instincts.  It  must  be  taken  fully  into 
account  in  any  discussion  of  the  subject. 

100.  It  will  be  admitted  by  most  of  those  who  have  thought  upon  the 
question  that  a  complete  return  to  the  old  conditions  of  handicraft  is 
impossible.  It  cannot,  at  any  rate,  be  contemplated  as  a  practical  pro- 
gramme for  the  near  future.  The  conditions  of  modern  life  involve  an 
ever-extending  amount  of  repetition  work  done  to  precise  measurements. 
In  work  of  this  kind,  whether  it  be  done  by  hand  or  by  machinery,  there 
is  little  room  for  exercise  of  the  higher  faculties  of  craftsmanship.  The 
defence  of  labour-saving  machinery  from  the  human  standpoint  is  that  it 

39 


removes  the  slieer  muscular  drudgery  from  such  work  and  enables  a  greater 
amount  to  be  produced  in  shorter  hours  and  with  less  strain  and  exhaustion 
to  the  worker.  Moreover,  the  increased  complexity  of  machinery  is  con- 
tinually operating  in  the  direction  of  restoring  the  balance,  by  calling  upon 
the  operator  for  a  care  and  a  degree  of  skill  approaching  more  nearly  to 
craftsmanship.  This  tendency  would  be  largely  fortified  if  more  care  were 
taken  to  explain  to  operators  the  purpose  of  their  task,  and  the  part  it  plays 
in  the  process  of  production.  There  is  no  reason  why  even  the  unskilled 
labour  connected  with  labour-saving  machinery  should  not  be  based  upon  a 
foundation  of  intelligence  and  responsibility  in  the  worker  which  would 
preserve  his  self-respect.  Xor  must  it  be  forgotten  that  the  construction 
and  maintenance  of  labour-saving  machinery  gives  rise  in  itself  to  the 
employment  of  a  large  amount  of  highly  skilled  labour. 

101.  The  chief  economic  objection  of  the  worker  to  the  introduction 
of  labour-saving  machinery  arises  from  his  belief,  unhappily  founded  on 
experience,  that  its  immediate  effect  is  to  lower  his  wages  or  deprive  him  of 
his  job.  With  some  qualifications,  this  objection  is  well-founded.  That 
such  a  result  is  not  invariable  arises  partly  from  the  fact  that  many  labour- 
saving  machines  are  very  costly,  so  that  a  wise  employer  will  offer  a 
journeyman's  wage  to  anyone  who  will  work  them  to  their  full  capacity, 
rather  than  pay  a  labourer's  wage  for  them  to  be  worked  at  half  or  two- 
thirds  capacity.  Moreover,  the  ultimate  effect  of  labour-saving  machinery 
is  to  lower  the  price  of  the  article  produced  and  thereby  to  increase  the 
demand  for  it,  which,  in  its  turn,  will  react  upon  the  demand  for  labour. 
It  remains  no  less  true,  in  the  main,  that  when  a  craftsman's  job  passes 
to  the  machine,  that  special  skill  which  is  his  sole  stock-in-trade  loses  its 
monopoly  value  and  he  stands  in  danger  of  sinking  from  an  unemployed 
craftsman  to  an  unemployed  labour  unit. 

102.  The  existence  of  cases  of  individual  hardship  does  not,  however, 
prove  that  the  introduction  of  labour-saving  machinery  is,  in  the  long  run, 
economically  injurious  to  Labour  as  a  whole.  That  such  cases  of  hardship 
should  arise  is  inevitable  in  all  industrial  progress,  as  well  as  in  every 
other  department  of  life.  Any  sudden  change  in  industry,  whether  due  to 
new  inventions,  to  fashion,  or  to  changing  conditions  with  regard  to  markets 
or  raw  material,  involves  a  similar  displacement.  To  resist  the  forces  of 
change  is  impossible,  and  the  attempt  to  retard  them  is  generally  pro- 
ductive of  waste  and  friction.  The  better  covirse  is  to  develop  the  new 
trade  or  system  rapidly  and  efiiciently  and  at  the  same  time  to  do  all  that  is 
possible  to  bridge  over  the  period  of  transition  and  protect  the  individuals 
affected.  In  the  case  of  labour-saving  machinery,  this  duty  is  particularly 
incumbent  upon  the  employer,  because  the  change  is  one  introduced  by  him 
for  his  own  profit.  It  is  his  duty  so  far  as  possible  to  provide  alternative 
work  for  the  men  displaced,  to  take  advantage  of  the  normal  fluctuations 
of  staff  to  spread  out  the  period  of  reduction,  to  allow  time  for  men  who 
cannot  be  retained  to  find  another  job.  The  only  course,  however,  which 
will  go  to  the  root  of  the  opposition  to  the  introduction  of  such  machinery, 

40 


is  for  the  employer  to  take  the  workers  into  his  confidence;  to  explain  to 
them  what  is  proposed;  to  discuss  with  them,  throygh  their  representatives 
or  their  Trade  Union,  the  machinery  required  to  meet  the  demands  of  com- 
petition, the  rate  of  its  introduction,  the  conditions  under  which  it  is  to 
be  worked  and  the  wages  to  be  paid  to  the  operators.  It  is  only  by  the 
co-operation  of  Employers  and  Employed  to  introduce  and  use  labour- 
saving  machinery  as  a  means  of  increasing  efficiency  of  production,  and 
not  merely  for  the  purpose  of  cutting  down  wages  while  increasing  profits, 
that  the  advantages  to  be  derived  from  its  vise  can  be  attained  with  the 
minimum  of  dislocation  and  loss  to  individuals.  At  the  same  time  a  better 
system  of  education,  tending  to  produce  all-round  competence  and  adapta- 
bility, would  go  a  long  way  towards  placing  the  worker  above  the  prospect 
of  disaster  due  to  a  change  in  conditions. 

(e)  Works  Organisation 

103.  No  method  of  increasing  output  is  more  promising  in  theory 
than  that  known  in  America  as  "Scientific  Management";  but  none  is  more 
open  to  abuse  and  frustration  in  practice.  It  is  based  on  the  conception  of 
a  works  in  wdiich  the  whole  routine,  down  to  the  last  detail  of  every  opera- 
tion, is  organised  by  the  management,  acting  through  a  staff  of  efficiency 
experts.  So  far  as  concerns  the  "routing"  of  work  through  the  shops,  no 
objection  can  arise.  Confusion,  over-lapping,  delay  and  waste  are  avoided 
and  the  course  of  the  work  is  made  to  run  smoothly  and  rapidly.  These 
are  true  functions  of  Management,  and  the  more  thoroughly  they  are  per- 
formed the  more  efficient  will  be  production  and  the  less  the  strain  on  the 
workers. 

104.  With  regard  to  the  functions  of  Labour,  the  methods  of  Scientific 
Management  are  more  open  to  question.  The  idea  is  to  analyse  and  time 
the  physical  movements  made  in  the  performance  of  each  operation  on 
every  job;  to  reduce  each  task  to  its  simplest  elements;  to  construct  a 
routine  from  which  every  superfluous  effort  or  movement  is  eliminated; 
and  to  train  workmen  to  follow  the  prescribed  schedule  as  a  coach  might 
train  a  boat's  crew  to  use  their  oars.  The  reactions  of  environment  and 
the  limitations  of  fatigue  are  studied;  no  overstrain  is  allowed;  rest  i-)eriods 
are  provided.  An  astonishing  increase  in  output  can  be  achieved  along 
these  lines ;  so  that  unprecedentedly  high  wages  can  be  and  are  paid  to  those 
who  will  work  under  the  system.  Nevertheless,  it  is  regarded  with  profound 
dislike  and  distrust  by  the  general  run  of  workers,  and  in  a  great  many 
cases  attempts  to  put  it  into  practice  have  had  to  be  abandoned. 

105.  The  reason  usually  given  by  the  men  for  their  hostility  is  that 
the  employer,  while  paying  higher  wages,  takes  care  that  a  much  more  than 
proportionate  increase  is  effected  in  his  own  profits,  so  that  the  ratio  of 
distribution  becomes  less  favourable  to  Labour  than  before.  But  this, 
though  a  natural  ground  of  soreness,  is  not  the  main  reason  for  the  work- 
man's opposition.  Underlying  all  economic  suspicion  is  the  worker's 
instinctive  aversion  to  becoming  a  mindless  automaton,  performing  without 

41 


variation  a  cycle  of  mechanical  movements  which  do  not  lead  to  increased 
general  proticiency,  which  open  the  way  to  no  higher  grade  of  employment, 
and  which  are  prescribed  not  by  himself  or  by  the  traditions  of  roaster- 
craftsmen  of  his  class,  but  by  an  outside  and  unsympathetic  authority  in 
the  shape  of  the  scientific  expert.  Before  the  undoubted  advantages  of 
motion  training  can  materialise  in  workshop  practice,  full  security  must 
be  given  against  these  evils.  This  can  be  done  only  by  introducing  the 
system  with  the  full  voluntary  co-operation  of  the  men;  and  such  co-opera- 
tion can  only  be  secured  by  first  putting  the  whole  proposition  before  them, 
explaining  frankly  the  risks  to  be  faced  as  well  as  the  benefits  to  be 
obtained,  and  transforming  the  whole  constitution  of  the  works  in  such  a 
way  that  the  men  themselves  may  have  an  interest  in  the  new  system  and 
some  share  of  control  over  the  working  of  it. 

(f)  Labour  Legislation 

106.  It  is  clear  that  organised  bodies  of  workers  and  employees  must 
in  the  immediate  future  play  a  greater  part  in  determining  the  policy  and 
direction  of  our  economic  life.  Many  industries,  however,  are  not  well 
organised;  and  only  a  quarter  of  the  whole  working  population  is  enrolled 
in  trade  unions.  The  greater  portion  of  the  unorganised  workers  are 
women,  young  persons  and  children,  whom  our  labour  laws  are  largely 
intended  to  protect.  Whatever  may  be  said  in  favour  of  voluntary  agree- 
ments, it  is  inevitable  that  the  protection  of  women  and  young  people  must, 
for  the  time,  be  in  large  measure  left  to  the  State.  The  first  need  is  for  a 
revision  of  our  whole  code  of  labour  laws  with  a  view  to  their  co-ordination 
and  the  eradication  of  those  anomalies  and  historical  accidents,  which 
for  no  real  reason  establish  different  standards  and  conditions  for  pro- 
tected persons.  In  the  second  place,  there  is  a  strong  case  for  a  further 
limitation  of  hours  in  the  case  of  employees  in  factories  and  workshops,  and 
distributive  shops,  and  for  a  very  considerable  improvement  in  the  environ- 
ment in  which  work  is  carried  on.  For  healthier  workplaces,  the  provision 
of  dining  and  rest  rooms  are  absolutely  necessary  in  the  interests  alike  of 
industrial  efficiency  and  of  social  welfare.  In  general,  it  may  be  said,  that 
our  Labour  Legislation  should  be  thoroughly  overhauled  and  strengthened 
to  meet  the  demand  for  a  higher  general  standard  of  life,  in  such  ways  as 
will  increase  the  self-respect,  dignity  and  efficiency  of  the  protected  workers. 
The  whole  task  of  bringing  our  industrial  legislation  on  all  sides  into  con- 
formity with  the  new  national  needs,  should  be  undertaken  with  the  active 
co-operation  of  Labour  and  Employers;  indeed,  all  modifications  and 
developments  should  be  based  in  the  first  place  upon  the  joint  recommenda- 
tions of  Employers'  Associations  and  Trade  Unions. 

(g)  Reform  of  the  Patent  Laws 

107.  The  original  purpose  of  the  existing  patent  laws  was  (1)  to  pro- 
mote the  commercial  development  of  inventions,  by  giving  the  inventor  a 
monopoly  in  the  patented  article  for  a  term  of  years;  and  (2)  to  ensure 

42 


a  full  account  of  the  invention  being  published,  in  order  that  when  the 
monopoly  period  expires,  anyone  may  be  in  a  position  to  make,  sell  or  use 
the  patented  device  or  process.  As  they  stand  at  present,  the  laws  do  not 
adequately  fulfill  these  intentions.  It  is  becoming  increasingly  common 
for  patents  to  be  obtained  or  acquired  for  the  sole  purpose  of  preventing 
development,  in  the  interests  of  an  existing  process.  The  fees  charged  also 
require  revision.  Many  minor  inventions,  though  in^portant  as  far  as  they 
go,  and  entitling  the  inventor  to  the  protection  of  the  patent  laws,  will  not 
yield  a  return  proportionate  to  the  heavy  fees  demanded  in  the  later  years 
of  the  term.  Moreover,  the  effect  of  high  patent  fees  is  to  place  the 
inventor,  if  he  is  not  a  rich  man,  at  an  imfair  disadvantage  as  compared 
with  the  capitalist,  though  both  are  equally  necessary  to  placing  the  inven- 
tion on  the  market.  There  is  a  tendency  to  forget  that  what  the  inventor 
gives  to  the  community  in  exchange  for  a  temporary  monoply  is  an 
account  of  his  invention  from  which  the  community  derives  permanent 
benefit.  To  consider  patent  fees  merely  as  a  source  of  revenue  is,  in  the 
long  run,  economically  unsound.  There  is  every  ground  for  believing  that 
the  pre-eminence  of  America  in  the  production  of  ingenious  small  tools 
and  appliances  is  mainly  due  to  the  superiority  of  her  patent  laws.  The 
whole  matter  requires  careful  reconsideration  from  the  three-fold  point  of 
view  of  stimulating  invention,  encouraging  production  and  the  protection 
of  the  consumer.  An  effort  should  especially  be  made  to  devise  some 
means  whereby  patentees  of  small  means  can  obtain  guidance,  assistance 
and  protection  in  the  commercial  development  of  their  inventions. 

(h)  Encouragement  of  Research 
108.  The  Encouragement  of  Eesearch  in  connection  with  the  applica- 
tion of  Science  to  Industry  holds  out  possibilities  hitherto  better  appreciated 
by  our  commercial  rivals  than  by  ourselves.  The  war  has  called  attention 
to  the  advantages  which  the  Germans,  in  particular,  have  derived  from 
their  admirable  organisation  of  practical  scientific  training,  especially  in 
connection  with  the  chemical  industries.  For  industrial  purposes  research 
may  be  classified  under  two  headings — Theoretical  Eesearch  of  a  general 
nature,  having  no  obvious  and  immediate  practical  application,  and  Specific 
Research  directed  to  the  solution  of  definite  problems  of  production. 
Neither  kind  can  be  safely  neglected.  The  experiments  of  pure  scientists 
have  often  led  to  discoveries  of  high  commercial  value  which  were  wholly 
unlooked  for  by  those  who  made  them.  The  encouragement  of  Theoretical 
Research,  which  may  yield  results  of  national  utility,  is  a  proper  object  for 
State  action.  Specific  Research,  the  results  of  which  will  be  capable  of 
immediate  commercial  application,  can  best  be  carried  on  in  close  con- 
nection with  the  industries  concerned.  It  would  be  well  worth  the  while  of 
big  Employers'  Associations  to  subsidise  research  on  problems  connected 
with  their  industry  at  Technical  Colleges  or  Municipal  Laboratories  in  the 
leading  centres  of  industry,  on  the  understanding  that  the  results  obtained 
were  communicated  solely  to  members  of  the  Association.     Such  subsidies 

43 


might  even  be  extended  to  research  of  a  more  general  character,  in  any  field 
touching  the  materials  and  processes  of  the  industry  in  question.  The 
results  obtained  by  the  scientific  experts  could  then  be  submitted  to  the 
staifs  of  works  laboratories,  who  would  at  once  recognise  the  commercial 
possibilities  which  they  might  hold  and  could  refer  them  back  for  specific 
research  along  the  lines  indicated  by  their  practical  knowledge  -and 
experience. 

(i)  Improved  Methods  of  Distribution 

109.  What  has  been  said  thus  far  has  had  special  reference  to  manu- 
facture; but  efiiciency  in  the  distributive  side  of  industry  is  no  less  impor- 
tant. To  produce  a  good  article  at  a  moderate  cost  is  not  enough;  the 
process  is  only  complete  when  it  has  been  delivered  to  the  customer.  Both 
transport  and  selling  methods  in  this  country  are  capable  of  improvement. 
The  question  of  transport  is  of  special  importance  in  the  case  of  agriculture, 
the  development  of  which  has  been  gravely  hampered  by  the  lack  of  railway 
or  motor  facilities.  Both  in  regard  to  agriculture  and  manufactures,  the 
extension  of  these  facilities  and  the  fixing  of  rates  require  close  attention 
on  the  part  of  traders,  the  railways  and  the  State.  The  system  of 
co-operative  collecti®n  and  distribution  by  means  of  light  railways  and 
motor  services,  which  has  been  so  successful  in  Ireland,  could  in  many  cases 
be  usefully  applied  for  bringing  local  products  to  the  market.  The  arts  of 
selling,  publicity,  window-display,  delivery,  careful  study  of  the  require- 
ments of  the  public,  the  personal  element  in  service,  the  training  of  com- 
mercial travellers,  all  require  increased  attention.  The  planning  and 
equipment  of  shops  and  offices,  the  training  of  the  staffs  and  the  organisa- 
tion of  routine  are  as  important  as  the  equivalent  processes  in  manufacture; 
and  as  in  production,  the  best  results  can  only  be  obtained  by  fostering  the 
intelligence  and  initiative  of  employees  and  cultivating  the  "team-spirit." 
At  the  same  time,  the  services  of  the  specialist,  the  advertising  or  window- 
dressing  expert,  are  as  important  to  the  distributive  business  as  those  of  the 
scientist  and  inventor  to  the  manufacturer, 

(k)  Banking  and  Credit  Facilities 

110.  The  solid  and  cautious  policy  of  British  Bankers  has  been  a 
main  foundation  of  the  general  financial  soundness  which  has  made  this 
covmtry  the  credit  centre  of  the  world.  It  would  be  an  irretrievable  loss  if 
their  reputation  in  this  respect  was  allowed  to  suffer.  Nevertheless  it  is 
probable  that  they  could  afford  greater  assistance  to  Industry  than  they 
have  done  in  the  past,  without  running  such  risks  as  would  in  any  way 
jeopardise  their  stability.  In  view  of  the  probable  necessities  of  the 
situation,  it  is  very  desirable  that  the  leading  bankers  should  study  for 
themselves  how  far  it  may  be  possible  for  the  Banks  to  worh  in  closer  touch 
with  Industry  and  lend  their  invaluable  support  to  its  future  developments. 

111.  The  condition  of  Industry  after  the  war  will  render  it  particu- 
larly desirable  that  the  centralisation  of  Banking  by  the  large  Joint-Stock 

44 


Banks  should  not  be  allowed  to  hamper  the  discretion  of  trustworthy  Branch 
Managers  in  making  the  local  advances  on  the  strength  of  non-paper  col- 
lateral and  of  established  character  which  were  a  useful  feature  of  the 
older  system.  A  wise  use  of  this  power  would  enable  the  Banks  to  render 
valuable  assistance  to  traders,  without  involving  the  disadvantages  inherent 
in  the  German  conception  of  the  relations  of  Banking  and  Industry. 

The  Danger  of  Panic  Economy 

112.  In  connection  with  the  above  points,  as  well  as  with  those 
embraced  under  the  heading  of  Emergency  Measures,  it  will  be  necessary 
to  exercise  great  care  that  a  reaction  from  the  lavish  spending  necessi- 
tated by  the  war  does  not  lead  to  an  outbreak  of  panic  economy  in  State 
expenditure.  Nothing  could  create  a  worse  feeling  and  temper  than  any 
appearance  of  stinginess  towards  the  men  who  have  fought  for  us,  whether 
in  connection  with  the  treatment  of  the  disabled  or  the  schemes  for  reintro- 
ducing the  demolished  men  to  civil  life.  These  are  matters  of  national 
responsibility  which  cannot  be  left  to  any  private  efforts  involving  the 
stigma  of  charity.  Nothing  could  be  a  more  false  economy  than  to  allow 
the  work  of  education — technical  or  general — scientific  research,  housing, 
or  the  improvement  of  the  national  health  to  be  obstructed  at  a  time  when 
the  whole  welfare  of  the  nation  turns  upon  increased  efiiciency.  Money 
spent  for  these  purposes  is  not  exi)ended  on  a  luxury,  but  is  a  paying  invest- 
ment, perhaps  even  an  insurance. 

(ii)     Increased  Saving 

113.  Capital  for  the  repair  and  improvement  of  the  national  plant 
and  the  reconstruction  of  devastated  areas  abroad — which  will  provide  work 
at  home — can  only  be  furnished  by  people  producing  much,  spending  little 
on  consumption  of  goods,  and  saving  the  balance. 

114.  There  is  real  need  for  an  educational  campaign  to  explain  the 
principles  of  economy,  whether  with  regard  to  spending  less  or  spending 
more  wisely.  Such  questions  as  the  comparative  effect  upon  emploj'ment 
of  expenditure  upon  luxuries  and  investment  in  productive  industries  are 
very  little  understood.  There  is  a  vast  amount  of  wasteful  expenditure  by 
the  rich  which  is  either  due  to  sheer  thoughtlessness  or  is  excused  by  the 
assumption  that  it  "makes  work."  There  is  also  a  great  deal  of  wasteful 
expenditure  by  the  poor,  which  is  due  either  to  lack  of  training  in  house- 
hold economy  or  to  unfavourable  conditions. 

115.  It  is  necessary  to  bear  in  mind  that  the  saving  and  investing 
class  is  composed  at  the  present  time  almost  exclusively  of  the  compara- 
tively well-to-do.  If  any  agreement  for  the  settlement  of  industrial  difficul- 
ties is  arrived  at  which  results  in  a  wider  distribution  of  wealth,  it  will  be 
necessary  to  consider  what  can  be  done  to  make  working-class  investment, 
whether  by  individuals  or  groups,  easier,  safer  and  more  attractive.  The 
Co-operative  movement,  Mutual  Insurance  and  Friendly  Societies,  and  the 
management  of  existing  Trade  Union  Funds  may  supply  hints  as  to  the 
best  means  of  attaining  this  end. 

45 


116.  There  is  danger  to  be  avoided  in  urging  working  class  "thrift." 
The  man  who  stints  himself  or  his  family  in  the  necessaries  of  physical, 
intellectual  or  emotional  life  is  rendering  no  service  to  the  nation,  whatever 
capital  he  may  accumulate.  Up  to  a  certain  point  the  unstinted  consump- 
tion of  the  material  of  life  is  of  definite  valvie  in  producing  industrial 
efficiency  and  capacity  for  citizenship.  But  with  increased  income  and  a 
better  acquaintance  with  the  right  use  of  wealth  a  point  is  reached  at 
which  an  increasing-  margin  becomes  available  for  leg-itimate  saving.  It  is 
probable  that  a  greater  feeling  of  security  and  responsibility  would  of  itself 
lead  to  the  useful  employment  of  this  margin. 

117.  In  the  immediate  future,  however,  the  savings,  necessary  for 
capital  renewal  wull  have  to  come  mainly  from  restricted  consumption 
on  the  part  of  the  well-to-do.  The  cutting  down  of  expenditure  on  luxuries 
not  only  liberates  labour  for  the  increased  production  of  necessaries,  but 
renders  capital  available  for  investment  in  productive  industries. 
Economy  of  this  kind  does  not  diminish  the  total  demand  for  goods  or 
labour.  Even  if  the  money  be  left  in  the  bank,  it  is  used  as  a  basis  for  the 
credit  needed  for  industrial  development,  and  sets  up  a  demand  for  the 
instruments  and  materials  of  production.  The  volume  of  demand  is  not 
affected,  but  only  its  character. 

(m)     Assured  Markets 

118.  Assured  Markets  are  essential  to  steady  production.  They  will 
be  found  by  British  industry  (a)  in  the  Home  Demand;  (b)  in  the  Over- 
seas Dominions;  (c)  in  Foreign  Trade. 

(a)   Home  Demand 

119.  The  Home  Demand  depends  first  of  all  upon  the  general  pi'os- 
perity  of  the  people.  If  confidence  and  credit  are  maintained  and  earnings 
are  large,  the  increase  of  spending  power  wull  be  reflected  in  a  brisk  demand 
for  goods.  In  this  connection  the  question  of  agricultural  development, 
discussed  below,  is  important,  as  tending  to  increase  the  spending  power  of 
a  large  number  of  people  wdio  have  hitherto  formed  one  of  the  poorest 
sections  of  the  home  market.  For  the  first  few  years  after  the  war  the 
general  demand  should  be  guided  and  restrained  by  the  need  of  increased 
savings,  necessitating  moderation  in  consumption  as  well  as  increased 
output.  The  use  of  these  savings  for  the  renewal  of  the  national  plant  will, 
however,  create  a  strong  demand  in  those  trades  concerned  with  the  manu- 
facture of  the  instruments  of  production.  As  soon  as  the  process  of  capital 
renewal  has  been  accomplished,  the  special  necessity  for  restricted  con- 
sumption will  cease  and  the  demand  will  become  general,  the  annual  balance 
of  production  over  consumption  serving  for  the  requisite  additions  to 
capital. 

120.  The  idea  of  securing  the  home  market  to  home  manufacturers 
by  levying  a  duty  on  competitive  imports  is  an  attractive  one  from  many 
points  of  view,  and  the  circumstances  of  the  war  will  give  occasion  for  new' 

46 


arguments  in  its  favour.  The  anticipated  danger  of  dumping  by  German 
or  American  firms,  anxious  to  get  a  footing  in  the  market  during  the  period 
of  readjustment,  the  desire  that  this  country  should  be  independent  of 
foreign  nations  in  respect  of  vital  industries,  the  means  afforded  by  a 
tariif  for  raising  additional  revenue  and  the  persistence  of  war  passions,  will 
all  go  to  make_the  setting  up  of  protective  tariffs  more  alluring. 

121.  It  has  none  the  less  to  be  remembered  that  protective  duties  have 
grave  reactions  and  are  hedged  about  with  possibilities  of  abuse  and  failure. 
The  difficulty  of  devising  a  scheme  which  will  avoid  the  danger  of  raising 
the  cost  of  living  out  of  proportion  to  the  possible  increase  in  wages  and 
shifting  the  financial  burden  from  the  shoulders  of  the  income  taxpayer  to 
those  of  the  consumer,  has  not  yet  been  overcome.  There  is  a  further 
risk  that  the  imposition  of  a  tariff  may  cripple  our  export  trade  by  raising 
the  price  of  raw  materials  and  production  and  shake  our  position  as  the 
entrepot  for  the  world's  products  and  the  centre  of  the  carrying  trade.  So 
far  as  Germany  is  concerned,  the  fear  of  dumping  is  probably,  in  large 
part,  illusorj-,  having  regard  to  the  cutting  off  of  her  supplies  of  raw 
material  during  the  war  and  the  excessive  drain  upon  her  labour  resources. 
The  stability  of  our  financial  position  during  the  war,  as  compared  with 
other  belligerents,  may  lead  us  to  pause  before  we  abandon  the  system  under 
which  our  industries  have  developed.  At  a  time  when  boldness  and 
initiative  on  the  part  of  our  leaders  of  industry  are  particularly  called  for, 
it  seems  specially  unwise  to  provide  an  artificial  shelter  from  competition. 

122.  In  considering  the  argument  on  either  side,  two  things  must  be 
kept  in  mind.  First,  that  important  as  the  Tariff  question  is,  it  cannot  in 
any  case  be  the  primary  one.  To  say  this  is  not  to  pre-judge  the  Tariff 
question.  Whether  under  a  Free  Trade  or  a  Protective  System,  the  first 
necessities  of  the  situation  will  be  increased  output  and  industrial  peace. 
The  experience  of  many  years,  in  this  country  and  in  America,  has  shown 
that  imder  neither  system  can  these  essentials  be  depended  upon,  unless  a 
bold  attempt  is  made  to  grapple  with  our  internal  difficulties.  Secondly, 
every  claim  for  a  tariff  must  be  considered  not  only  from  the  point  of  the 
industry  affected,  but  from  that  of  other  industries,  of  the  consumer  and  of 
the  nation  as  a  whole.  On  this  larger  survey,  it  may  prove  impossible  for 
even  the  advocates  of  tariffs  to  ask  for  protection  in  particular  cases  or  for 
even  their  opponents  to  resist  them  in  others.  But  it  is  exceedingly  impor- 
tant that  ill  every  case  the  grounds  on  which  the  tariff  is  claimed  should  be 
clearly  understood,  and  that  if  protection  is  granted  to  any  particular 
trade  from  considerations  of  national  defence  or  political  desirability,  it 
shall  be  granted  on  those  (j rounds  and  without  any  obscuring  of  the 
economic  issue. 

(h)  Empire  Markets 

123.  The  question  of  Imperial  Fiscal  Union  will  be  argued  on  the 
same  grounds  as  before  the  war.  The  desire  for  the  closest  possible  union 
with  the  Overseas  Dominions  has,  of  course,  been  intensified  by  the  events 

47 


of  the  war,  though  it  is  open  to  doubt  whether  the  spontaneous  and  splendid 
rally  of  the  Dominions  has  not  given  a  setback  to  the  contention  that  fiscal 
ties  were  necessary  to  the  peiTnanence  of  the  Empire.  It  is  possible  that 
they  might  introduce  an  element  of  discord  and  create, a  suspicion  of 
attempted  control  by  the  Mother  Country  which  would  render  them  a 
disruptive  rather  than  a  unifying  tendency.  In  any  case  the  question  is 
mainly  a  political  one,  to  be  argued  on  political  grounds,  but  with  a  due 
allowance  made  for  its  economic  effects. 

(c)  Foreign  Markets 

124.  Success  in  Foreign  Markets  will  depend,  as  before  the  war,  upon 
the  production  of  a  desirable  article  at  an  attractive  price  and  upon  the  skill 
with  Avhich  goods  are  brought  to  the  attention  of  buyers.  It  is  agreed  by 
almost  all  business  men  that  there  is  room  for  great  improvement  in  the 
organisation  of  selling.  Up-to-date  methods  of  publicity  must  be  adopted. 
Industrial  concerns  will  need  to  unite  for  the  joint  cultivation  of  foreign 
markets,  sinking  their  individual  rivalries  and  jealousies  in  the  common 
object,  receiving  much  more  active  aid  from  the  Board  of  Trade  and  the 
Consular  Service  than  has  hitherto  been  given.  A  first  hand  study  of 
foreign  markets,  more  efficient  representations  abroad,  better  co-operation 
between  merchants  and  shipowners,  greater  watchfulness  by  Government  in 
cases  of  infringement  of  British  Trade  Marks,  are  all  measures  the  need  for 
which  was  apparent  before  the  war  and  will  be  increased  by  the  severity  of 
competition  after  peace  is  signed.  The  contention  that  appointments  to 
the  Consular  Service  should  be  given  only  to  men  of  British  birth  and  busi- 
ness training  will  be  emphasised.  On  the  other  hand  it  is  a  constant  com- 
plaint of  our  most  efficient  Consular  representatives  that  so  little  use  is 
m.ade  of  their  offices  by  traders.  The  need  of  studying  the  requirements 
of  foreign  markets  and  of  greater  adaptability  in  respect  of  meeting  local 
demands,  packing,  quotations  in  metric  measures  and  foreign  currency  and 
the  use  of  foreign  languages  will  all  be  brought  to  the  front.  The  utility 
or  otherwise  of  creating  a  Ministry  of  Commerce  or  National  Trade  Agency 
will  require  full  examination  and  discussion. 

125.  One  result  of  the  war  will  have  been  t©  give  us  a  certain  advan- 
tage not  only  in  the  markets  of  our  Allies,  but  in  those  of  some  neutral 
States.  The  success  with  which  our  own  carrying  trade  has  been  main- 
tained, while  that  of  Germany  has  been  completely  shut  down,  has  given  to 
our  merchants  an  opportvmity  to  extend  existing  connections  and  form  new 
ones  which  should  not  be  missed.  The  disregard  of  neutral  rights  shown  by 
the  Germans  in  the  use  of  South  American  territorial  waters  is  a  case  in 
which  we  may  derive  advantage  from  a  strong  sentimental  preference, 
which  however,  can  only  be  maintained  by  sound  business  methods. 

126.  We  must  not  lose  sight  of  the  connection  between  the  home  and 
foreign  markets.  The  more  goods  we  can  sell  abroad  the  greater  will  be  the 
purchasing  and  saving  power  of  our  people  at  home.  On  the  other  hand 
the  ability  of  foreigners  to  buy  from  us  depends  in  large  part  upon  our  pur- 
chase of  their  products. 

48 


(J)  Allied  Zollverein  and  Trade  War 

127.  The  proposal  for  an  Allied  Zollverein  and  the  possibility  of  a 
Trade  War  with  Gerinanj-,  as  distinct  from  ordinary-  commercial  com- 
petition, are  very  large  qnestions,  involving  political  as  well  as  economic 
considerations.  It  is  a  matter  of  importance  that  these  should  be  clearly 
distinguished  in  the  discussion.  It  may  sometimes  be  desirable  to  achieve 
a  political  object  even  at  the  cost  of  economic  sacrifice;  but  it  is  essential 
that  in  so  doing  we  should  realise  clearly  what  we  are  about.  On  the  other 
hand,  it  leads  to  dangerous  mental  confusion  if  a  step  which  can  be  shown 
to  be  economically  desirable  is  advocated  on  exclusively  political  grounds. 

128.  We  shall  save  ourselves  from  many  pitfalls  if  we  keep  steadily 
in  mind  that  industry  and  war  are  totally  dissimilar  operations.  War  is  a 
conflict,  and  the  object  of  war  is  destruction.  Industry  is  a  process  of 
co-operation,  the  object  of  which  is  production.  It  is  much  the  same  with 
war  and  trade.  The  conflict  of  war  and  the  competition  of  trade  are  dif- 
ferent in  kind  as  well  as  in  degree.  The  object  of  conflict  is  to  inflict 
injury.  The  object  of  business  competition  is  the  opportunity  to  serve  a 
customer.  War  is  competition  in  its  absolute  sense  and  in  its  most  violent 
form.  If  nations  co-operate  in  war  it  is  for  the  purpose  of  conflict  with 
others.  Trade  is  competitive  only  in  its  processes;  its  end  is  co-operation. 
We  have  learnt  by  experience  that  the  organisation  and  processes  of  peac*e 
are  ill-adapted  to  the  needs  of  war.  Tlie  processes  of  war  are  equally 
ill-adapted  to  the  conditions  of  industry  and  trade.  We  may  have  to  choose 
between  war  and  trade.  Let  us  at  least  recognise  that  it  is  a  choice  and  not 
confound  the  functions  of  opposites. 

(iv)     Land 

129.  We  have  not  dealt  here  with  the  theory  that  the  root  of  all 
economic  evils  is  the  private  ownership  of  land,  and  that  whatever  may 
be  done  to  increase  the  output  of  wealth,  the  increase  will  automatically  be 
appropriated  by  the  land-owning  class,  in  the  shape  of  economic  rent.  In 
the  broad  sense  this  theory  is  demonstrably  unsound.  It  is  certainly  not 
tiie  fact  that  the  increased  proceeds  of  the  great  industrial  development 
during  the  nineteenth  century  have  been  absorbed  into  economic  rent.  The 
general  increase  of  rent  is  so  gradual  and  laggard  a  process  compared  with 
industrial  progress  that  it  may  be  left  out  of  account  here.  Should  a  rapid 
advance  in  agricultural  prosperity  take  place  after  the  war  and  be  fol- 
lowed by  a  marked  increase  in  rents,  thi'eatening  to  absorb  the  extra  earn- 
ings and  discourage  furtlicr  progress,  the  power  of  the  State  may  have  to 
be  invoked. 

130.  The  question  of  land  ownership  aud  economic  rent  is  the  less 
pressing  at  this  juncture  in  that  there  are  unmistakable  signs  of  the  breakup 
of  many  of  the  large  landed  estates  after  the  war,  owing  to  the  inability  of 
their  i)ro]iri<>tors  to  keep  them  going  on  the  old  lines. 

49 


(r)     Agriculture 

131.  Far  more  promising  than  any  land-nationalisation  or  single-tax 
project  is  the  application  to  agricultural  development  of  the  same  degree 
of  thought,  energy,  training,  education  and  organisation  as  is  devoted  to 
manufacture.  It  is  eminently  desirable  that  British  agriculture  should 
be  developed.  It  would  render  us  more  self-sufficing  in  the  event  of  isola- 
tion, it  would  restore  the  balance  of  our  national  activities,  it  would  give  tis 
a  healthier  and  more  vigorous  population,  and  it  would  prevent  the  further 
overgrowth  of  our  large  cities  with  its  consequent  over-crowding.  If 
agriculture  has  suffered  neglect  from  our  statesmen,  it  has  suffered  far  more 
neglect  from  our  industrial  pioneers  and  organisers.  The  importance  of 
improved  facilities  for  transport,  and  of  investigating  the  problem  of 
agricultural  credit,  has  already  been  urged  (paragraphs  109  and  84).  The 
multiplication  of  existing  local  Produce  Societies  for  the  co-operative 
buying  of  seeds,  manures,  appliances,  feeding  stuffs,  etc.,  and  the  co-opera- 
tive marketing  of  the  produce  in  bulk  would  do  much  to  ensure  the  success 
of  the  small-holder.  The  education  of  village  children  should  be  brought 
into  relation  with  thier  future  work,  just  as  that  of  town  children  is  m^de 
the  basis  of  industrial  training.  ^Ye  have  suffered  much  in  the  past  from 
an  inelastic  curriculum  applied  indiscriminately,  without  any  attention  to 
the  special  needs  of  localities  and  classes.  The  observation  and  environ- 
ment teaching  of  the  primary  schools  should  be  directed  to  awakening 
interest  in  and  understanding  of  the  life  around  them,  and  the  eye  and 
hand  training  to  the  perfecting  of  those  faculties  which  will  be  most  useful 
in  agricultural  work.  At  a  later  stage,  direct  vocational  training  may  be 
given,  either  at  special  schools  or  in  daytime  classes  for  junior  workers. 
In  this  way  it  should  be  possible  to  make  of  the  agricultural  labourer  a 
skilled  worker,  and  to  invest  his  work  and  life  with  a  greater  degree  of 
dignity  and  interest,  which  will  go  far  to  counteract  the  drift  towards  the 
urban  centres.  The  facilities  for  farmers  and  foremen  to  acquire  a  knowl- 
edge of  scientific  farming,  stock  rearing  and  gardening  should  also  be 
largely  increased  and  greater  encouragement  given  to  research  and  experi- 
ment in  connection  with  cultivation.  With  an  improvement  both  in  the 
management  of  the  land  and  the  efficiency  of  the  workers,  the  problem  of 
agricultural  wages  should  be  easier  of  solution,  and  a  general  rise  in  wages 
would  enable  the  question  of  housing  in  rural  districts  to  be  tackled  on  an 
economic  basis. 

132.  To  sum  up  very  briefly  what  has  already  been  said:  We  shall  be 
faced  after  the  war  by  an  industrial  situation  of  extreme  gravity  due  partly 
to  the  intensification  of  the  conditions  which  made  for  unrest  before  the 
war,  partly  to  the  difficulties  inseparable  from  the  readjustment  to  peace 
conditions.  These  difficulties  can  be  met  to  some  extent  by  the  adoption 
of  immediate  remedial  measures,  a  number  of  which  are  suggested  above. 
But  these  measures,  important  in  themselves,  will  go  to  the  root  of  the 
industrial  problem.  In  like  manner  the  increased  production  and  increased 
saving  which  will  be  essential  to  the  renewal  of  the  national  capital  and  the 

50 


restoration  of  industrial  prosperity,  can  be  promoted  by  the  study  and  solu- 
tion of  a  large  number  of  detailed  questions  bearing  on  Industrial  EflBciency, 
Increased  Savings  and  Assured  Markets.  Here  again  the  fundamentals 
remain  untouched.  At  the  back  both  of  the  Emergency  and  the  Con- 
structive Problems  lies  the  hostility  between  Labour,  Management  and 
Capital  by  which  production  has  been  hampered  in  the  past  and  which  now 
threatens  us  with  a  crisis  the  dangers  of  which  it  is  not  easy  to  exaggerate. 
Unless  we  can  deal  successfully  with  this  basic  problem,  no  amount  of  skill 
in  handling  the  secondary  questions  will  save  us.  If  w-e  can  deal  with  it 
successfully  we  shall  have  laid  the  foundation  for  the  solution  of  all  our 
other  difficulties,  and  we  may  hope  not  merely  to  avert  the  threatened 
dangers,  but  to  establish  industrial  prosperity  and  social  development  upon 
a  firmer  basis. 


51 


D. — The  Fundamental  Problem 

133.  In  order  that  we  may  understand  the  nature  and  importance  of 
the  fundamental  problem,  it  is  neeessarj^  to  examine  a  little  more  closely  the 
essentials  of  industrial  prosperity  and  its  relations  to  national  welfare. 

134.  The  foundation  of  industrial  prosperity  is  production.  The 
material  well-being  of  a  nation  demands  first,  the  attainment  of  the  possible 
maximum  both  as  regards  size  and  quality  of  output,  whether  of  goods 
or  services;  secondly,  the  elimination  of  all  waste  of  material  or  effort  in 
the  process  of  production;  thirdly,  an  equitable  division  of  the  proceeds  of 
industry,  enabling  all  those  concerned  in  the  creation  of  wealth  to  obtain 
a  reasonable  share  of  its  material  benefits.  The  social  welfare  of  the  nation 
requires  that  the  conditions  of  work  and  the  relations  between  the  parties  to 
industry  shall  be  such  as  make  for  intelligent  and  self-respecting  citizenship 
on  the  part  of  all  concerned,  and  that  the  activities  which  occupy  so  large  a 
proportion  of  men's  time  and  powers  shall  be  felt  by  them  to  be  fit  and 
worthy  employment  of  their  energies.  Any  attempt  to  solve  industrial 
problems  which  is  concerned  solely  with  the  distribution  of  earnings  must 
necessarily  be  inadequate.  In  the  first  place,  the  amount  available  for  dis- 
tribution depends  upon  the  amount  produced,  and  an  attempt  by  any  section 
of  the  community  to  increase  its  own  share  of  the  proceeds  by  a  scheme  of 
redistribution  which  ignores  the  necessity  of  increased  creative  effort  is  apt 
to  result  in  a  shrinkage  of  the  available  total.  In  the  second  place,  the 
questions  which  centre  round  wages  and  profits,  important  as  they  are,  are 
not  so  vital  as.  the  questions  of  industrial  relations  and  social  conditions 
with  which  they  are  connected. 

135.  In  order  that  production  may  be  efficient  both  as  regards  the 
quantity  and  quality  of  output  and  the  methods  employed,  it  is  essential 
that  the  supply  of  capital  should  be  adequate  and  that  the  national  plant 
should  be  kept  up  to  date.  The  war  has  involved  deterioration  of  plant  and 
a  heavy  drain  on  capital.  In  order  that  capital  may  be  renewed  and  the 
national  plant  repaired  and  kept  in  the  highest  state  of  efficiency  it  is 
essential  that  confidence  should  be  maintained  and  savings  increased.  The 
accumulation  of  surplus  wealth  which  we  call  capital  represents  the  balance 
of  production  over  consumption  in  previous  years  and  is  constantly  being 
added  to  or  diminished  in  accordance  with  the  ratio  of  goods  produced  to 
goods  consumed.  When  that  accumulation  has  been  depleted,  the  deficiency 
can  be  made  good  only  by  an  increase  in  the  annual  balance.  It  will  be 
necessary  to  encourage  economy  in  the  consumption  of  goods  and  the  invest- 
ment of  the  resulting  savings  in  productive  industries.  We  must  work 
hard  and  efficiently  in  order  to  produce  more.  We  must  spend  less  on 
luxuries  in  order  that  we  may  save  more.    We  must  increase  confidence  in 

52 


the  national   industries  in  order  that  savings  may  be   attracted  into  the 
right  channels. 

136.  Increased  production,  increased  saving,  increased  confidence — 
these  are  the  keys  to  the  whole  problem. 

137.  Production  may  be  hampered  either  in  pursuance  of  a  deliberate 
policy,  or  simply  by  the  use  of  inefficient  methods.  The  interest  of  Employ- 
ers, as  a  general  rule,  is  to  increase  output,  the  danger  of  over-stocking 
being  met  by  improved  distributive  organisation  and  the  opening  up  of 
new  markets.  Cases  of  restriction,  for  the  sake  of  keeping  up  prices,  occur 
mainly  in  connection  with  monopoly  products  and  the  problem  of  counter- 
acting the  influences  which  make  for  restricted  output  in  these  cases 
deserves  a  more  careful  study  than  has  yet  been  given  to  it.  There  is  also 
a  tendency,  perhaps  unconscious,  on  the  part  of  some  employers  to  throw 
obstacles  in  the  way  of  increased  output  due  to  the  exceptional  efficiency 
of  employees.  They  would  rather  have  a  smaller  output  produced  by  men 
receiving  wages  not  above  the  customary  limit  than  an  increased  output 
produced  by  men  earning  exceptionally  high  wages.  As  soon  as  the  earn- 
ings of  any  men  in  their  employ  rise  above  the  customary  level,  they 
begin  to  cut  piece  rates,  with  the  natural  result  of  removing  the  incentive 
to  efficiency  and  diminishing  output.  This  policy  is  not  only  unjust  to  the 
men  concerned;  it  is  shortsighted  and  uneconomic  from  the  point  of  view 
of  the  employer's  own  interests.  On  the  other  hand,  the  interest  of  the 
individual  employer  in  maintaining  a  high  standard  of  quality  cannot  be 
taken  for  granted,  so  long  as  large  profits  can  be  derived  from  the  sale  of 
inferior  goods.  Stronger  action  on  the  part  of  Trade  Associations,  and 
more  general  education  of  the  purchasing  public  in  standards  of  value,  are 
needed  both  in  the  national  interest  and  in  that  of  producers  of  high  class 
goods. 

138.  Much  of  the  limitation  of  output  on  the  part  of  Employers  arises 
from  inefficiency  in  management — conservation  in  methods,  the  retention 
of  badly-planned  works  and  out-of-date  plant,  bad  organisation,  neglect  of 
scientific  research,  the  presence  of  "dejid-heads"  on  the  office  staff.  There 
is  some  reason  to  hope  that  the  experiences  of  the  war  and  the  keenness  of 
competition  after  it  may  lead  to  greater  attention  being  paid  to  these  points. 

139.  The  limitation  of  output  by  Labour  arises  partly  from  the  legiti- 
mate desire  to  restrict  the  hours  of  work  in  the  interest  of  health,  educa- 
tion, family  life  and  enjoyment.  These  are  considerations  of  social  welfare 
which  cannot  be  set  aside.  We  must  look  for  greater  production  rather 
from  increased  efficiency  than  from  an  increase  in  the  number  of  hours 
worked.  There  are,  however,  large  sections  of  Labour  by  whom  a  further 
limitation  of  output  is  deliberately  practised  in  the  assumed  interests  of 
their  class  as  a  whole.  In  some  cases  the  motive  is  the  honest  but  mistaken 
belief  that  the  less  each  man  does  the  more  work  there  will  be  to  go  round. 
''Work"  is  regarded  as  an  exhaustible  fund,  or  at  the  best  as  a  diminishable 
flow,  and  it  is  assumed  to  be  in  the  interests  of  his  class  that  each  man 
should  "use  up''  as  little  as  possible.     The  fallacy  lies  in  the  conception  of 

53 


an  inelastic  "wages  fund."  Wages  come  out  of  the  stream  of  products, 
and  other  factors  remaining  constant,  the  distribution  of  wages  cannot  be 
widened  except  by  an  increase  of  the  stream.  In  the  case  of  trades  in 
which  employment  is  irregular  and  demand  uncertain,  the  temptation  to 
slacken  work  as  a  job  nears  completion  is  easy  to  understand,  but  the 
results  of  the  policy  are  too  wasteful  to  be  contemplated  with  satisfaction. 
The  remedy  must  be  sought  in  a  better  organisation  of  the  industries  con- 
cerned which  will  give  the  workman  greater  security  of  tenure,  and  remove 
the  fear  of  unemployment  or  relegation  to  lower-paid  work  as  a  result  of 
exercising  his  maximum  effort.  A  further  cause  of  limitation  of  output 
lies  in  the  natural  differences  of  individual  capacity.  The  workers  believe 
that  if  each  man  were  allowed  to  produce  to  his  full  power,  the  minimum 
standard  demanded  by  the  employer  would  be  based  on  the  performances  of 
the  quickest  and  most  skilful  and  a  "speeding-up"  process  would  be  intro- 
duced, involving  either  excessive  strain  or  lessened  earnings  on  the  part 
of  the  majority.  From  this  point  of  view,  restriction  of  output  is  a  sacrifice 
made  by  the  ablest  workers  in  the  interests  of  their  fellows.  While  such 
restrictions  necessarily  result  in  limiting  the  total  output,  it  is  obvious  that 
Labour  cannot  fairly  be  asked  to  remove  them  unless  some  definite  assur- 
ance can  be  given  against  the  evils  anticipated.  The  question  is  one  which 
will  require  very  serious  attention  both  from  Employers  and  Employed, 
when  we  come  to  face  the  task  of  industrial  reconstruction. 

140.  With  regard  to  quality  of  output  it  is  obvious  that  the  workers' 
interest  lies  in  the  direction  of  a  high  standard  which  will  improve  the 
status  of  those  concerned  in  the  industry,  ^\^letller  from  the  point  of  view 
of  earning  power  or  of  interest  and  satisfaction  in  their  work,  the  workmen 
have  everything  to  gain  by  the  standard  of  workmanship  in  their  particular 
trade  being  raised.  A  general  appreciation  of  this  fact,  resulting  in  greater 
attention  by  Labour  organisations  to  questions  of  craft  training  and  quality 
of  output,  would  do  much  both  to  raise  the  position  of  Labour  itself  and  to 
strengthen  the  hands  of  those  employers  who  are  striving  for  a  high  level 
of  production,  as  against  those  who  seek  to  make  their  profit  out  of  the  bad 
taste  of  bargain  hunters. 

141.  It  is  clear  that  any  restrictions  placed  upon  production,  whether 
by  Employers  or  Employed,  beyond  those  based  upon  the  social  needs  of  the 
workers,  must  be  removed  if  the  difficulties  of  the  economic  situation  are 
to  be  faced  successfully.  In  order  to  make  good  the  wastage  of  war  and 
raise  the  general  level  of  industrial  prosperity,  the  efforts  of  both  parties 
must  be  united  for  the  purpose  of  increasing  the  quantity  of  output  and 
improving  its  quality.  In  order  to  avoid  disastrous  conflicts  with  regard 
to  the  distribution  of  earnings,  the  national  income,  the  total  sum  available 
for  distribution,  must  not  only  be  maintained,  but  increased.  The  pros- 
pects of  success  depend  upon  the  willingness  of  both  sides  to  face  the  facts 
of  the  situation  and  to  throw  aside  somewhat  of  their  mutual  distrust. 
It  will  be  necessary  for  Labour  to  abandon  the  policy  of  restricting  output 
and  to  concentrate  upon  demanding  adequate  remuneration  for  the  work 

54 


performed.  It  will  be  equally  necessaiy  for  Employers  to  recognise  that 
efficient  production  is  the  only  ultimate  source  of  profit,  that  the  policy  of 
keeping  down  wages  and  cutting  piece  rates  is  opposed  to  their  own  inter- 
ests, and  that  industry  as  a  whole  will  benefit  by  any  rise  in  the  level  of 
craftsmanship  and  production.  There  is  to-day  an  urgent  necessity  for  the 
removal  of  all  obstacles  to  any  man  either  working  or  earning  to  the  full 
extent  of  his  capacity. 

142.  The  argument  has  brought  us  to  the  fundamental  question  which 
underlies  all  our  industrial  troubles — the  relation  between  Employers  and 
Employed.  The  limitation  of  production,  whether  by  Labour  restrictions 
on  output  or  cutting  of  piece  rates  by  Employers,  springs  from  the  belief 
that  the  interests  of  Employers  and  Employed  are  inevitably  and  funda- 
mentally hostile.  If  it  can  be  shown  that  their  interests  are  concurrent  as 
regards  production  and  only  partially  opposed  even  as  regards  distribution, 
the  waj'  will  have  been  paved  for  a  compromise  which  will  leave  both 
parties  free  to  co-operate  in  the  work  of  industrial  reconstruction. 

143.  The  relations  of  Employers  and  Employed  are  partly  antagonistic 
as  regards  distribution,  because  it  is  to  the  interest  of  each  to  secure  a 
relatively  large  share  of  the  wealth  produced.  They  are  not  wholly  opposed, 
even  in  this  respect,  because  it  is  to  the  interest  of  the  employer  that  his 
workpeople's  standard  of  life  shall  be  sutficiently  high  to  promote  efficiency 
and  afford  a  reasonable  incentive  to  effort ;  it  is  to  the  interest  of  the  work- 
man that  the  firm  shall  be  sufficiently  prosperous  to  provide  steady  employ- 
ment. Good  work  cannot  be  expected  from  men  who  are  ill-fed  and  insuffi- 
ciently clothed,  or  who  feel  that  they  derive  no  advantage  from  increased 
production.  Continued  employment  cannot  be  expected  from  a  firm  which 
is  not  making  a  profit  on  its  business.  The  qualification  becomes  still  more 
important  when  it  is  extended  from  the  relations  existing  in  a  particular 
firm  to  industry  as  a  whole.  It  is  to  the  interest  of  all  employers  engaged 
in  the  supply  of  common  commodities  that  wages  as  a  whole  should  be  good, 
in  order  that  the  purchasing  power  of  their  customers  may  be  high.  It  is 
to  the  interest  of  the  workers,  who  are  also  consumers,  that  firms  pro- 
ducing aticles  of  general  use  should  be  sufficiently  prosperous  to  keep  plant 
up  to  date  and  produce  well  and  cheaply. 

144.  The  interests  of  Employers  and  Employed  are  concurrent  as 
regards  production,  because  it  is  to  the  benefit  of  each  that  the  total 
available  for  distribution  shall  be  as  large  as  possible.  The  interest  of  the 
working  class  in  increase  of  output  may  be  limited  by  other  than  economic 
considerations.  They  will  not  accept  for  the  sake  of  increased  wages 
methods  of  work  which  involve  loss  of  self-respect  or  a  narrowing  of  their 
life  by  undue  restriction  of  leisure.  To  this  extent  the  interest  of  the 
employer  may  be  over-ridden  by  considerations  of  social  welfare.  The  real 
conflict  is  between  his  economic  interests  as  an  employer  of  labour  and  the 
social  interests  of  the  community  of  which  he  is  a  member.  But  the 
employer  and  employed  are  both  concerned  in  increased  efficiency  of  pro- 
duction,   which    implies    equal    or    improved    output    at    less    cost    to    the 

55 


employer  and  with  less  strain  to  the  employed.  Here,  too,  it  is  to  be  noted 
that  the  workman,  as  consumer,  will  benefit  by  any  increase  in  the  general 
etticiency  of  production. 

145.  The  great  obstacle  to  co-operation  is  the  question  of  status. 
The  ill-will  of  Labour  towards  Capital  and  Management  is  not  wholly  a 
question  of  their  respective  share  of  earnings.  Friction  arising  over  the 
distribution  of  earnings  is  in  itself  due  quite  as  mxich  to  a  sense  of  injus- 
tice to  the  machinery  of  distribution  as  to  the  desire  for  actual  increase  of 
wages.  The  fundamental  grievance  of  Labour  is  that  while  all  three  are 
necessary  parties  to  production,  the  actual  conditions  of  industry  have 
given  to  Capital  and  Management  control  not  only  over  the  mechanism  of 
production,  but  also  over  Labour  itself.  They  feel  that  the  concentration 
of  Capital  in  a  comparatively  few  hands  has  rendered  fair  bargaining 
between  the  parties  impossible.  A  man  who  leaves  his  work  without  reason 
inflicts  on  his  employer  a  certain  amount  of  loss  and  inconvenience.  A 
man  who  is  dismissed  without  reason  may  lose  his  livelihood.  While  each 
great  firm  represents  in  itself  a  powerful  organisation,  apart  from  any 
Employers'  Association  to  which  it  may  belong,  the  men  employed  by  the 
firm  are  solitary  units,  having  no  power  of  collective  action  without  calling 
in  the  Trade  Unions  representing  the  whole  of  each  craft.  In  the  last 
resort  the  only  effective  weapon  of  the  Trade  Union  is  the  strike,  and  the 
loss  inflicted  by  a  strike  or  lock-out  on  the  Capitalist  Class  is  not  com- 
parable with  the  acute  personal  suffering  of  the  workmen  and  their  fam- 
ilies. They  feel,  therefore,  that  in  any  dispute  the  dice  are  weighed 
against  them. 

146.  There  is  also  a  very  widespread  feeling  that  Labour  as  a  whole 
is  faced  by  great  disadvantages  in  ventilating  its  grievances.  The  tribunals 
are  composed,  the  Press  is  owned  and  run,  by  men  of  another  class;  and 
the  complaint  is  frequently  made  that  the  Labour  representative  and  the 
Labour  case  do  not  receive  the  fair  play  and  courtesy  which  would  be 
extended  to  those  of  their  ''opponents." 

147.  The  attitude  of  a  certain  section  of  Employers  who  look  on 
their  employees  as  "hands,"  as  cogwheels  in  the  industrial  machine,  having 
a  market  value,  but  no  recognised  rights  as  human  beings,  is  bitterly 
resented.  Still  more  offensive  is  the  attitude  which  regards  the  working 
man  as  a  very  good  fellow  so  long  as  he  is  kept  in  his  place  and  requir- 
ing to  be  guided  and  disciplined,  but  not  to  be  consulted  in  matters  vitally 
affecting  his  interests.  Labour  has  come  to  know  its  power.  It  realises 
that  it  is  an  indispensable  party  to  the  production  of  wealth  and  it  requires 
to  be  treated  frankly  as  a  partner  with  equal  rights  and  equal 
responsibilities. 

14S.  The  grievances  of  the  Employers  are  no  less  valid.  They  com- 
plain of  deliberate  limitation  of  output,  slackness  and  inefficiency  in  work, 
short  time  and  malingering,  the  lack  of  any  feeling  of  responsibility. 
They  point  out  that  many  leaders  of  Labour  opinion  carefully  discourage 
any  sense  of  loyalty  to  the  firm — the  source  from  which  the  earnings  of 

56 


Capital  aiul  Labour  are  alike  derived — that  even  a  fair  employer  can  feel 
no  confidence  that  his  workmen  will  back  him  up  in  a  pinch.  Any  effort 
to  improve  the  condition  of  the  employees  is  rep:arded  as  a  concession 
extorted  from  weakness  and  is  followed  by  further  demai^ds  which  bear  no 
relation  to  the  condition  of  trade.  Every  period  of  prosperity  produces 
a  demand  for  liigher  wages;  but  no  amount  of  depression  is  considered  as 
an  excuse  for  reverting  to  a  lower  scale.  The  Trades  Union  wage  regula- 
tions place  obstacles  in  the  way  of  differentiation  between  the  efficient  and 
industrious  workman  and  those  who  are  less  skilled  or  less  hardworking. 
At  the  same  time  they  render  it  impossible  to  continue  in  employment, 
without  actual  loss,  men  whose  capacity  for  production  has  been  decreased 
by  age  or  accident. 

149.  The  gravest  complaint,  however,  relates  to  the  insecurity  of  bar- 
gaining. The  Employer's  power  to  negotiate  directly  with  his  employees  is 
restricted  by  the  I'nion,  yet  bargains  thus  made  with  the  men's  accredited 
representatives  are  continually  broken  by  those  whom  they  profess  to  bind 
and  the  Union  itself  cannot  enforce  the  agreement  which  it  has  made. 

150.  So  long  as  the  fundamental  interests  of  Employers  and  Employed 
are  believed  by  the  majority  to  be  purely  antagonistic,  no  cure  for  the 
grievances  of  either  side  is  likely  to  be  found,  since  the  wrongs  of  which 
both  sides  complain  spring  from  that  very  feeling  of  hostility  and  suspicion. 
For  just  so  long  as  this  attitude  is  maintained,  production  will  fall  short 
of  its  possible  total. 

151.  The  limitation  of  prodviction  carries  with  it  a  limitation  of  the 
])os3ible  amount  of  savings.  If  the  total  amount  produced  is  low,  the 
balance  of  production  over  consumption  also  will  be  low.  But  class- 
hostility  hampers  saving  in  other  ways.  The  supposed  clash  of  interests 
destroys  the  sense  of  responsibility  in  the  use  of  wealth.  Discontent  with 
economic  conditions  is  productive  of  reckless  expenditui'c.  The  man  who 
feels  his  condition  of  life  to  be  unworthy  has  no  incentive  to  save,  because  he 
has  no  hope  of  substantial  improvement  in  his  condition.  The  worse  that 
condition  is,  the  greater  is  his  need  of  amusement  and  palliatives  to  render 
it  bearable.  Sound  investment  is  discouraged  because  the  pr9spect  of 
repeated  outbreaks  of  industrial  warfare  makes  confidence  impossible. 

152.  We  see,  therefore,  that  the  mutual  hostility  of  Employers  and 
Employed  is  the  prime  obstacle  to  the  three  essentials  of  industrial  ])ros- 
perity — Increased  Output,  Increased  Saving,  Increased  Confidence.  It  is 
only  from  the  removal  of  this  obstacle  that  any  one  of  the  thn>e  parties  to 
the  industrial  process  can  look  for  a  permanent  increase  of  earnings. 

153.  We  may,  therefore,  law  down  these  four  broad  principles  as  those 
whicli  niust  guide  our  attempt  to  solve  the  Industrial  Problem. 

(a)  The  first  necessity  of  the  Industrial  Situation  is  greater  efficiency 
of  production.  In  order  to  meet  the  difficulties  created  by  the  war, 
to  make  good  the  losses  of  capital,  and  to  raise  the  standard  of 
living  amongst  the  mass  of  our  people,  we  must  endeavour  to 
increase    both    the    volume    and    the    quality    of   output. 

57 


ib)  In  order  that  this  result  may  be  obtained  without  detriment  to  the 
social  welfare  of  the  community,  it  must  be  sought  for  rather  in 
improved  organisation  and  the  elimination  of  waste  and  friction, 
than  in  adding  to  the  strain  on  the  workers,  and  must  be  accom- 
panied by  a  change  of  attitude  and  spirit  which  will  give  to  Industry 
a  worthier  and   more   clearly   recognised    place   in   our   National    life. 

(c)  This  can  only  be  accomplished  if  the  sectional  treatment  of  indus- 
trial questions  is  replaced  by  the  active  co-operation  of  Labour, 
Management  and  Capital  to  raise  the  general  level  of  productive 
capacity,  to  maintain  a  high  standard  of  workmanship,  and  to 
improve   working   conditions. 

(d)  It  is  essential  to  the  securing  of  such  co-operation  that  Labour,  as 
a  party  to  Industry,  should  have  a  voice  in  matters  directly  con- 
cerning its  special  interests,  such  as  rates  of  pay  and  conditions  of 
employment.  It  is  necessary  to  create  adequate  machinery  both 
for  securing  united  action  in  the  pursuit  of  common  ends  and  for  the 
equitable  adjustment  of  points  which  involve  competing  interests. 
This  machinery  must  be  sufficiently  powerful  to  enable  both  sides 
to  accept  its  decisions  with  confidence  that  any  agreement  arrived 
at  will   be   generally  observed. 

154.  Tliere  are  many  to  whom  these  principles  will  not  seem  to  go  for 
enough.  They  are  convinced  that  the  only  solution  lies  in  a  complete 
reconstruction  of  Society — the  abolition  of  Private  Ownership  of  Land 
and  Capital,  the  establishment  of  State  or  Guild  Socialism,  the  Re-integra- 
tion of  Industry,  the  Return  to  the  Land,  the  break-up  of  the  existing 
Trade  L^nions.  Accordingly  they  reject  the  notion  of  co-operation  between 
Employers  and  Employed  as  involving  an  abandonment  of  the  first  essentials 
of  reform.  If  we  were  discussing  the  abstract  ideal  of  Society,  it  would 
be  necessary  to  meet  their  criticisms  by  discussing  each  of  their  proposals 
on  its  merits.  But  the  present  issue  is  a  narrower  one.  We  have  to  deal 
with  a  definite  and  immediate  danger — the  prospect  of  an  industrial  crisis 
following  on  the  signing  of  peace.  It  is  obvious  that  no  measure  involving 
a  radical  reconstruction  of  the  social  system  has  any  chance  of  adoption 
in  time  to  avert  this  evil.  On  the  other  hand,  the  prospect  of  any  specific 
programme  emerging  from  a  period  of  internal  conflict  is  small.  The 
results  of  social  or  political  upheavals  have  seldom  been  those  anticipated 
by  their  promoters.  The  men  whose  ideas  gave  birth  to  the  French  Revo- 
ution  did  not  foresee  the  Terror  or  the  Empire.  The  Long  Parliament 
foresaw  neither  the  reign  of  the  Major-Generals  nor  the  Restoration.  If  we 
are  to  fijid  a  way  out  of  the  threatened  difiiculties,  we  must  do  so  by 
making  the  best  use  of  the  materials  at  hand,  accepting  the  conditions 
under  which  we  work  and  seeking  to  unite  all  classes  in  the  pursuit  of 
interests  which  are  common  to  all.  Whatever  may  be  the  ultimate  direction 
of  industrial  progress,  an  advance  is  more  likely  to  be  founded  on  a  first 
right  step  than  to  come  through  the  chaos  of  industrial  warfare  and 
class-hatred. 

155.  The  difiicvilties  of  devising  any  scheme  of  co-operation  which 
shall  be  acceptable  alike  to  Employers  and  Employed  are  great  enough. 
It  demands  from  both  a  clear  understanding  of  their  respective  parts  in  the 
process  of  production,  a  measure  of  sympathy  with  the  point  of  view  of 
the  other  parties  to  that  process  and  a  just  perception  of  the  respective 

58 


weight  to  be  attached  to  conflicting  and  to  common  interests.  It  calls  for  a 
certain  daring  in  experiment  and  for  a  willingness  to  make  concessions,  if 
needs  be,  for  the  common  good.  It  requires  both  parties  to  abandon 
recrimination  as  to  the  mistakes  of  the  past  and  to  approach  each  other  in 
a  new  spirit. 

156.  These  are  great  demands;  but  the  emergency  and  the  opportunity 
are  also  great.  Whatever  we  may  do,  we  may  be  sure  that  things  will  not 
continue  to  move  quietly  in  the  familiar  grooves.  The  whole  world  alike 
of  conditions  and  ideas  has  been  violently  shaken  and  a  ferment  has  been 
set  up  out  of  which  may  come  either  good  or  evil,  bvit  in  no  event  a  reversion 
to  the  old  order.  We  cannot  alter  the  facts  by  ignoring  them.  Our  only 
choice  lies  between  the  risks  involved  in  abandoning  ourselves  passively. 
to  the  forces  of  change  and  the  effort  required  to  harness  them  for  our 
own  ends. 

157.  To  avoid  chaos  is  much;  of  itself  it  would  be  worth  no  small 
sacrifice  and  effort  on  the  part  of  all.  The  gain  which  might  accrue  to  any 
class  from  conflict  is  shadowy  and  uncertain ;  the  loss  and  suffering  to 
every  class  alike  are  certain  and  heavy. 

158.  But  to  avoid  danger  is  not  all.  It  seems  probable  that  we  stand 
to-day  at  one  of  those  definite  turning  points  in  human  history'  where 
a  generation  of  men  has  it  in  its  power,  by  the  exercise  of  faith  and  wisdom, 
by  facing  the  problems  of  the  moment  without  passion  and  without 
shrinking,  to  determine  the  course  of  the  future  for  many  years.  If  we 
can  rise  to  the  height  of  our  opportunity  we  may  hope  not  merely  to  pass 
safely  through  the  immediate  crisis,  but  to  contribute  largely  to  the  future 
welfare  of  the  nation. 

159.  Whatever  action  is  taken  must  be  the  result  of  frank  and  full 
discussion  between  representatives  of  all  parties  to  the  question.  Any 
attempt  to  enforce  upon  one  party  a  scheme  framed  wholly  by  another 
would  defeat  its  own  object  and  precipitate  the  crisis.  It  will  not  do  to 
look  to  the  Government  for  the  initiative.  Whatever  part  the  State  may 
play  in  the  future  of  Industry,  it  cannot  move  in  advance  of  the  general 
level  of  opinion  among  those  concerned.  Most  of  the  difficulties  which  have 
been  analysed  in  this  Memorandum  apply  with  equal  force  to  State  con- 
trolled industries,  and  while  the  solution  may  involve  legislative  sanction 
or  State  action,  the  problem  itself  can  be  settled  only  by  agreement 
between  those  chiefly  concerned. 

160.  The  first  step  towards  agreement  is  to  define  the  functions  of 
the  three  parties  to  production. 

Capital  is  necessary  to  a  business  for  the  erection  of  plant,  the  pur- 
chase of  raw  material  and  working  expenses.  In  order  that  Capital  should 
be  used  to  the  best  advantage  for  the  purposes  of  industry,  it  is  necessary 
that  investors  should  display  sound  judgment  as  to  the  prospects  and 
requirements  of  particular  enterprises,  exercising  caution  or  daring  as 
occasion  demands. 

59 


Management  is  concerned  with  the  disposition  of  the  Capital  provided, 
the  erection  and  employment  of  machinery  and  plant,  the  general  organisa- 
tion of  the  business,  tlie  placing  and  acceptance  of  contracts,  the  purchase 
of  the  raw  material  and  the  sale  of  the  finished  product.  The  perform- 
ance of  these  functions  requires  not  merely  a  knowledge  of  the  particular 
business  concerned,  but  of  all  which  are  in  any  way  connected  with  it, 
a  careful  study  of  markets,  of  methods  of  distribution  and  of  financial 
conditions. 

Lahoitr  undertakes  the  conversion  of  the  raw  material  into  the  finished 
product,  by  aid  of  the  plant  and  machinery  provided.  While  the  first 
requisite  in  the  workman  is  a  thorough  understanding  of  his  own  job,  the 
maximum  efficiency  can  only  be  attained  if  he  has  a  clear  conception  of 
the  part  played  by  his  own  work  in  the  whole  process  of  prodiiction. 

These  definitions  are  framed  with  a  view  to  a  manufacturing  business, 
but  they  can  be  adapted,  by  changes  which  will  readily  suggest  themselves 
and  are  not  vital,  to  a  distributive  industry. 

161.  It  is  obvious  that  the  functions  of  Capital,  Management  and 
Labour  overlap.  In  many  cases  the  man  who  provides  the  funds  of  a 
business  also  directs  its  working.  In  such  cases  he  performs  both  the 
waiting  and  risk-taking  functions  of  Capital  and  Management's  function 
of  expert  control.  It  is  logical  to  regard  his  profits  as  consisting  partly 
of  interest  on  the  capital  provided  and  partly  of  remuneration  for  his 
services  as  manager.  Again,  a  foreman  or  a  ganger  combines  to  some 
extent  the  functions  of  Labour  and  Management;  and  in  general,  the 
spheres  of  management  and  labour  activity  are  too  closely  connected  for 
any  clear  line  of  demarcation  to  be  drawn  between  them.  Capital  itself 
represents  the  result  of  past  services  performed  by  all  three  parties. 

162.  This  inter-relation  of  functions  constitutes  a  real  partnership* 
between  the  persons  concerned  in  any  business,  whether  as  investors,  man- 
agers or  workmen,  or  in  any  two  or  all  of  these  capacities.  At  present 
the  relation  between  them  is  unrecognised  or  only  partly  understood,  and 
the  result  is  to  produce  hostility  instead  of  co-operation  between  the 
partners.  The  attention  of  all  is  apt  to  be  concentrated  on  the  points 
in  which  their  interests  conflict  to  the  exclusion  of  those  in  which  they 
are  common. 

163.  This  failure  to  realise  the  possibilities  of  co-operation  springs 
largely  from  neglect  of  a  fundamental  principle.  The  first  article  of 
partnership  is  equality  of  knowledge.  At  present  the  Workers  have  little 
knowledge  of  the  capital  risks,  working  expenses,  establishment  and  depre- 
ciation charges  of  a  business,  or  of  the  relation  between  their  particular 
job  and  the  general  process  of  production.  On  the  other  hand,  Employers 
have,  as  a  rule,  a  very  imperfect  understanding  of  the  Workers'  point  of 
view,  the  degree  in  which  they  are  affected  by  economic  and  social  con- 
siderations respectively,  and  the  effect  of  particidar  processes  and  methods 


*Thp  word   partncrshii)   is  hore  used  in  its  widest  sense  and  does  not  involve  the 
iicceptance  of  what  arc  nenerall.v  Ivnown  as  co-partnersliip  schemes. 

60 


of  working  upon  their  physical  and  moral  life.  From  the  mutual  ignorance 
arise  innumerable  misuuderstaudings  with  regard  to  rates  of  pay  and 
conditions  of  labour  which  are  capable  only  of  arbitrary  solutions,  because 
neither  side  understands  the  standpoint  of  the  other.  It  is  probable  that  a 
large  percentage  of  the  disputes  arising  over  rates  of  pay,  the  introduction 
of  labour-saving  machinery,  hours  of  work,  the  demarcation  of  tasks, 
Trade  Union  restrictions,  could  be  avoided  or  compromised,  if  Employers 
and  Employed  really  understood  the  reasons  for  the  attitude  of  the  other 
party.  In  default  of  such  understanding,  the  dispute  takes  on  the  char- 
acter of  a  trial  of  strength,  in  which  each  side  is  compelled,  for  the  sake 
of  principle  and  prestige,  to  put  forth  efforts  disproportionate  to  the  actual 
point  at  issue. 

164.  It  has  been  said  in  paragraph  145  that  the  chief  obstacle  to 
co-operation  is  the  question  of  status.  The  development  of  modern  industry 
has  turned  the  operative  into  a  mere  cog  in  the  industrial  machine.  The 
average  working  man  has  no  say  in  the  management  of  the  business  and 
very  little  as  to  the  "conditions  of  his  employment ;  he  has  no  interest 
in  the  success  of  the  firm,  except  that  it  should  not  collapse  altogether; 
and  the  tendency  has  been  more  and  more  to  reduce  his  work  to  a  mechan- 
ical routine.  The  term  "wage-slavery,"  so  often  used,  means  something 
more  than  the  mere  economic  dependence  of  the  worker  on  his  employ- 
ment. It  embodies  the  revolt  of  the  worker  against  a  system  which  gives 
him  neither  interest,  nor  pride,  nor  a  sense  of  responsibility  in  his  work. 
To  a  large  proportion  of  those  engaged  in  industry  their  work  has  become 
something  external  to  their  personal  life,  a  disagreeable  necessity  afford- 
ing no  opportunity  for  self-expression,  the  joy  of  creation,  or  the  realisa- 
tion of  healthy  ambitions.  The  result  has  been  a  serious  impoverishment 
and  enfeeblement  of  life  and  character  and  a  permanent  obstacle  to  indus- 
trial development.  It  is  impossible  for  men  in  this  position  to  take  long 
views,  or  to  consider  innovations  from  the  standpoint  of  industry  as  a 
whole.  The  opposition  to  new  methods  of  working,  labour-saving  machin- 
ery, dilution  of  labour,  scientific  management,  is  only  in  part  the  result 
of  specific  and  reasoned  objections.  It  springs  still  more  largely  from  the 
fact  that  these  schemes  are  imposed  from  above  and  are  presumed  to  be 
framed  solely  in  the  interest  of  the  Employers.  The  opposition  to  them  is, 
in  fact,  a  revolt  against  dictation.  On  the  other  hand,  the  uncompromising 
attitude  of  Employers  does  not,  generally  speaking,  arise  from  a  tyrannical 
spirit  or  a  mere  desire  for  increased  profits,  but  from  impatience  with  the 
men's  separatist  attitude  and  their  inability  to  realise  the  common  dej^end- 
ence  of  Employers  and  Employed  upon  the  produce  of  thi'ir  joint  exertions. 

165.  The  same  difiiculty  arises  in  the  case  of  distribution  of  earnings. 
The  worker  feels  ^that  his  labour  is  treated  as  a  mere  commodity,  the 
market  value  of  which  may  be  forced  down  by  the  Employer,  irrespective 
of  any  consideration  of  a  decent  standard  of  life  for  the  Employed,  and 
that  he  receives  the  reward  of  his  toil,  not  as  a  matter  of  right  or  as  the 
equitable  division  of  the  proceeds  of  joint  effort,  but  as  a  dole  fixed  by  the 

61 


arbitrary  will  of  the  Employer  or  as  a  concession  extorted  by  force.  The 
Employer  feels  that  each  demand  made  vipon  him  represents  a  raid  upon 
his  profits  limited  solely  by  the  power  of  the  Workers'  organisations  and 
unaifected  by  any  consideration  of  the  working-  expenses  of  the  business, 
provision  for  depreciation  or  dilapidations,  or  the  building  up  of  a  reserve 
against  futvire  depression.  In  the  confusion  of  thought  arising  from 
imperfect  understanding,  there  is  a  tendency  to  regard  the  whole  problem 
as  centreing  round  the  concrete  question  of  distribution,  which  becomes 
a  symbol  of  the  general  opposition  of  interests.  The  consequence  is  that 
disputes  as  to  wages  are  often  fought  on  either  side  with  a  bitterness  and 
obstinacy  altogether  out  of  proportion  to  the  amounts  involved.  In  order 
to  arrive  at  a  clearer  conception,  it  is  essential  to  disentangle  as  far  as 
possible  the  economic  and  non-economic  factors.  If  the  question  of  status 
can  be  settled,  the  main  obstacle  to  an  agreement  as  to  distribution  will 
have  been  removed. 

166.  The  problem  is,  therefore,  to  settle  this  question  of  status  in 
some  way  which  shall  give  the  workman  the  sense  of  self-respect  and 
responsibility  which  he  desires,  without  interfering  unduly  with  the 
employer's  exercise  of  the  necessary  functions  of  naanagement.  The  Trade 
Union  regulations,  which  have  been  so  largely  suspended  by  agreement  for 
the  period  of  the  war,  were  mostly  directed  towards  this  end — the  assump- 
tion by  Labour  of  some  measure  of  control  over  the  conditions  under  which 
it  works.  They  refer  to  wages,  hours  of  labour,  overtime  and  Sunday  work, 
apprenticeship  and  the  inethod  of  entry  into  particular  occupations,  the 
kind  of  work  to  be  performed  by  different  classes  of  workers,  the  methods 
of  negotiation  between  Employers  and  Employed,  and  similar  questions. 
In  other  words,  they  represent  an  attempt  to  substitute  for  the  autocratic 
control  of  the  employer  over  the  working  lives  of  his  employees  a  greater 
and  greater  degree  of  self-direction  by  the  organised  workers  themselves, 
acting  through  their  accredited  representatives. 

167.  As  a  natural  result  of  the  assumed  conflict  between  the  funda- 
mental interests  of  Employers  and  Employed,  the  action  of  the  Trade 
Unions  took  the  form,  in  appearance  at  least,  of  an  attack  upon  the  profits 
of  the  Employers  and  their  right  to  control  the  conduct  of  their  business. 
It  was  largely  as  a  defence  against  the  Unions  that  the  great  Employers' 
Associations  came  into  being.  After  making  all  allowance  for  the  occa- 
sional insubordination  of  Trade  Union  members  and  the  lack  of  support 
given  in  some  quarters  to  the  Employers'  Federations,  the  effect  of  these 
parallel  organisations  has  been  beneficial  to  both  sides.  Hitherto,  however, 
the  action  of  both  groups  has  been  almost  entirely  negative.  They  have 
placed  restraints  both  upon  tyranny  and  upon  anarchy;  they  have  succeeded 
in  compromising  many  disputes  and  in  restricting  the  occasions  of  open 
conflict ;  but  they  have  done  little  or  nothing  to  remove  the  continual  under- 
current of  latent  hostility  and  divergence  of  effort  which  has  hampered 
industrial  development  far  more  than  the  direct  effect  of  strikes  and 
lock-outs.     They  have  potected  the  special  interests  which  they  respectively 

62 


represent ;  but  they  have  not  risen  to  the  conception  of  combined  action 
in  pursuit  of  their  common  interests.  Valuable  as  their  work  has  been, 
it  can  hardly  be  regarded  as  an  adequate  return  for  the  ability,  energy 
and  power  of  organisation  displayed  on  both  sides. 

168.     The  explanation  of  the  comparative  failure  of  the   Employers' 
Associations  and  Trade  Unions  on  the  constructive  side  of  the  industrial 
problem  is  to  be  found  in  their  strictly  sectional  and  defensive  origin  and 
outlook.    Regarding  themselves  as  entrusted  with  the  interests  of  one  party 
to  Industry  and  not  of  Industry  itself,  they  have  paid  no  attention  to  the 
problems  and  difficulties  of  the  other  side,  and  they  have  come  together 
only  when  one  had  a  demand  to  make  of  the  other  or  when  a  conflict  was 
imminent.     Thus  they  have  always  met  in  an  atmosphere  of  antagonism, 
and  their  negotiations  have  been  carried  on  as  between  two  hostile  bodies. 
Exchange  of  views  has  come  at  too  late  a  stage  in  the  proceedings,  when  a 
stand  has  alrea(]y  been  taken  on  both  sides  and  prestige  or  prejudice  forms 
an  obstacle  to  concessions.    What  is  still  more  important,  their  discussions 
have  been  confined  to  specific  points  of  dispute  and  have  not  embraced  the 
consideration  of  constructive  measures  for  the  improvement  of  industrial 
conditions  and  the  increase  of  efficiency.     Yet  the  possibilities  of  combined 
action  which  lie  in  these  two  great  groups  of  highly  organised  and  power- 
ful bodies  might  transform  the  whole  face  of  industrial  life.     Their  united 
knowledge  of  both  sides  of  the  industrial  process  should  enable  them  to 
throw  light  on  every  phase  of  its  successive  developments.     Their  united 
strength  would  render  them,  in  combination,  practically  irresistible.     But 
to  secure   the   realisation   of   these   possibilities   the   co-operation   between 
the  two  groups  must  be  continuous  and  constructive,  and  must  be  based 
upon  a  recognition  of  the  common  interests  of  Employers  and  Employed, 
both  as  parties  to  industry  and  members  of  the  community.     Employers 
must  realise  that  both  their  own  interests  and  the  obligations  of  citizenship 
impose  upon  them  the  necessity  of  a  sympathetic   understanding  of   the 
lives  and  standpoint  of  those  with  whom  they  work  and  a  willingness  to 
co-operate,  without  dictation  or  patronage,  in  every  endeavour  to  improve 
their  material  or  social  condiiions.     Labour  must  realise  its  direct  interest 
in  the  improvement  of  industrial  processes,  the  organisation  of  industry, 
the  standard  and  quantity  of  production,  and  the  elimination  of  waste  in 
material  or  effort.     Both  the  Employers'  Associations  •  and  Trade  Unions 
must   learn    to   regard   themselves   as   joint    trustees   of   one   of   the   most 
important  elements  of  the  national  life. 

169.  The  machinery  necessary  for  such  co-operation  will  require  to 
be  created.  The  existing  Conciliation  Boards,  or  Industrial  Boards  on  the 
Australian  model,  while  they  perform  many  useful  functions,  will  not 
serve  this  purpose.  These  Boards  are,  in  fact,  independent  Courts  sitting 
to  adjudicate  iipon  claims  in  respect  of  which  the  parties  are  imable  to 
agree.  Such  a  method  of  adjudication  is  in  many  ways  j)rot"('ral)le  to  the 
alternative  of  leaving  (piestions  to  bo  settled  by  conflict,  as  the  residt  of  a 
strike  or  lock-out.     They  eiufl)le  Emjjloyers  and  Employed  to  contract  on 

63 


more  equal  terms.  They  result  also  in  the  produetion  of  detailed  evidence 
whereby  eaeh  side  m,ight,  if  it  had  the  inclination,  understand  the  case 
of  the  other.  But  here,  too,  the  exchange  of  views  comes  too  late  and 
the  parties  meet  not  to  co-operate,  but  to  oppose  each  other.  Moreover, 
they  are  concerned  solely  with  the  settlement  of  specific  disputes,  and 
while  they  may  continue  to  do  useful  work  in  this  connection,  they  cannot 
provide  the  opportunity  for  that  continuous  and  constructive  co-operation 
of  Management  and  Labour  which  is  essential  to  any  satisfactory  solution 
of  the  industrial  problem. 

170.  Something  much  more  comprehensive  is  required,  and  the  task 
of  providing  it  will  need  very  careful  attention  froni  those  concerned.  It 
is  unlikely  that  any  one  scheme  could  be  devised  which  would  be  applicable 
to  all  industries  or  in  all  localities.  The  utmost  elasticity,  whether  in 
present  application  or  in  future  development,  is  necessary  to  any  system 
of  industrial  organisation,  for  industry  itself  develops  and  modifies  day  by 
day.  But  the  general  lines  upon  which  development  is  possible  can  be 
reduced  from  the  foregoing  analysis  of  the  difficulties  to  be  overcome. 

171.  In  its  simplest  form,  the  new  machinery  would  consist  of  Joint 
Committees,  representing  both  the  Management  and  the  Works  Staff.     This 
method  would  lend  itself  readily  to  experiment  by  individual  firms  and 
could  be  applied  even  in  the  unorganised  trades  where  no  strong  Trade 
Unions  or  Federations  of  Employers  exist.     At  the  meetings  of  such  Com- 
mittees any  questions  affecting  working  methods  and  conditions  could  be 
brought  up  for  discussion  by  either  side.     The  representatives  of  Manage- 
ment would  be  required  to  explain  the  nature  and  extent  of  any  proposed 
innovation   designed    to    increase    output   or   economise    effort — the    intro- 
duction of  new  automatic  machinery,  time  and  motion  study,  standardisa- 
tion of  tools,  analysis  of  fatigue,  elimination  of  waste — and  its  effect  upon 
the   earnings   of  the   firm    and    the   individual    worker.      This    explanation 
should  be  as  clear  and  full   as   possible,   with   the   object   of  giving  each 
worker  an  interest  and  sense  of  responsibility  in  his  work,  by  making  clear 
to   him,   through   his'  representatives,    the   reason   for   the   methods   to   be 
adopted  and  the  relation  of  his  job  to  the  whole  process  of  production.    The 
proposals  having  been  explained,  the  Workers'  representatives  would  con- 
sider them  from  the  point  of  view  of  the  interests  of  the  men  employed, 
the   relation    between   the   different    classes   of   labour,    the   strain   on   the 
workers,  the  ampunt  of  interest  and  intelligence  put  into  their  work.     If 
necessary,    they   would   put   forward   modifications   or   safeguards   for   the 
protection  of  these  interests.     Where  the  result  was  to  show  a  real  diver- 
gence of  opinion  or  of  interest,  it  would  be  freely  discussed,  with  a  view 
to  finding  a  way  round  and  adjusting  the  balance  between  common  and 
competing  interests.    In  like  manner,  proposals  for  alterations  in  the  hours 
or  conditions  of  labour,  in  the  interests  of  the  health  or  social  welfare  of 
the  workers,  would  be  put   forward  by  the  Workers'   representatives   and 
discussed  in  the  light  of  any  objections  on  the  score  of  expense  or  difficul- 
ties  of   working    urged   by   Kepresentatives   of   Management.      While    the 

64 


Representatives  of  Management  would  naturally  be  concerned  mainly  with 
the  efficiency  of  the  business  and  those  of  Labour  with  the  immediate 
interests  of  the  Workers,  it  is  very  desirable  that  neither  should  confine 
their  attention  to  their  own  side  of  the  business.  A  wise  Employer  will 
always  have  the  interests  of  his  staff  at  heart,  and  workmen  who  feel  them- 
selves to  have  a  recognised  interest  in  the  business  will  have  many  sug- 
gestions to  put  forward  for  promoting  its  efficiency. 

172.  In  the  staple  trades,  the  method  of  Works  Committees  would 
require  to  be  replaced,  or  supplemented,  by  Joint  Boards  comfposed  of 
representatives  of  the  Employers'  Associations  and  the  Trade  Unions. 
Having  regard  to  the  differentiation  of  functions  between  Management 
and  Labour  and  the  large  number  of  problems  affecting  one  or  both  parties, 
which  arise  in  a  big  industrv*,  one  representing  Management  and  the  other 
Labour,  with  a  Supreme  Board  of  Control  co-ordinating  the  work  of  both. 
The  functions  of  the  Management  Board  would  cover  the  "business"  side 
of  the  industry;  those  of  the  Labour  Board  would  relate  to  conditions  and 
hours  of  labour,  the  demarcation  of  tasks  and  everything  that  touches  most 
nearly  the  life  of  the  worker.  Representatives  of  these  Boards,  meeting 
on  the  Supreme  Board  of  Control,  would  deal  jointly  with  all  matters  by 
which  the  interests  of  both  parties  were  affected.  Such  questions  as  the 
Dilution  of  Labour,  which  is  becoming  increasingly  important,  yet  which 
cannot  be  dealt  with  satisfactorily  so  long  as  it  is  approached  from  one 
side  only,  would  be  discussed  by  the  Joint  Board  of  Control,  both  from 
the  point  of  view  of  efficiency  in  production  and  from  that  of  the  interests 
of  the  Workers  and  the  position  of  the  Trade  Unions.  In  this  manner  it 
should  be  possible  to  construct  and  give  effect  to  a  definite  ix)licy  and 
programme  for  each  great  industry  as  a  whole,  representing  a  reconciliation 
between  the  common  and  competing  interests  of  Employers  and  Employed, 
and  based  both  upon  the  desire  to  obtain  the  maximum  of  efficiency  and 
the  desire  to  obtain  the  best  possible  conditions  for  the  workers. 

173.  In  order  to  avoid  the  evils  of  inelasticity  and  over-centralisation, 
and  to  make  due  provision  for  the  varying  conditions  of  different  localities 
and  firms,  it  might  be  advisable  to  combine  the  creation  of  these  Central 
Boards  with  an  organisation  of  District  and  Works  Committees,  charged 
with  the  special  care  of  local  and  individual  interests  and  problems.  The 
representation  of  such  Committees  on  the  Central  Boards  and  the  delega- 
tion to  them  of  local  questions  would  constitute  a  protection  against  the 
injustice  which  might  otherwise  be  done  by  an  attempt  to  equalise  rates 
of  pay  in  areas  which  differ  widely  as  to  the  cost  of  housing  and  food,  or 
in  which  the  conditions  of  production  and  transport  produce  important 
variations  in  working  expenses.  They  would  also  serve  as  a  protection  to 
established  workshop  and  local  craft  traditions  against  the  deadening 
tendency  to  a  mechanical  uniformity. 

174.  In  its  most  ambitious  form,  the  Supreme  Board  of  Control  would 
resolve  itself  into  a  National  Industrial  Council  for  each  of  the  staple 
industries  or  groups  of  allied  industries.     The  members  would  be  elected 

65 


by  ballot,  each  electoral  unit,  or  pair  of  parallel  units,  returning  one  repre- 
sentative of  Management  and  one  of  Labour.  In  many  industries  it  would 
be  desirable  to  find  a  place  on  the  Council  for  representatives  of  the  Applied 
Arts,  both  with  a  view  to  raising  the  standard  of  design  and  workmanship, 
and  with  the  object  of  encouraging  the  human  and  creative  interest  in 
production.  A  Speaker  of  broad  sympathies  and  experience,  capable  of 
directing  and  focussing  the  discussions  upon  the  practical  problems  to  be 
dealt  with,  would  be  chosen  by  mutual  consent,  but  would  have  no  casting 
vote,  his  capacity  being  purely  advisory.  Such  Industrial  Councils  would 
in  no  sense  supersede  the  existing  Employers'  Associations  and  Trade 
Unions,  many  sides  of  whose  present  activities  would  be  unaffected  by  the 
creation  of  the  new  bodies.  Matters  connected  with  the  sources  and  supply 
of  raw  material  and  the  cultivation  of  markets  for  the  disposal  of  the 
finished  products  would  remain  exclusively  the  concern  of  purely  com- 
mercial federations  of  manufacturers,  acting  in  conjunction  with  the  State. 
The  benefit  side  of  Trade  Unions  and  many  phases  of  the  internal  organisa- 
tion of  labour  by  them  would  be  similarly  imaffected.  In  other  matters 
the  connection  between  the  old  and  the  new  bodies  would  be  close,  without 
any  loss  of  identity.  The  Unions  and  the  Employers'  Associations  would 
send  their  delegates  to  the  Industrial  Councils  charged  with  the  defence  of 
the  special  interests  represented  by  them  and  equipped  with  special  knowl- 
edge of  their  particular  problems.  The  general  policy  outlined  by  the 
Industrial  Parliaments  would  be  carried  out  in  detail  largely  through  the 
older  organisations. 

175.  The  field  of  action  open  to  the  Industrial  Councils  would  be 
very  great.  It  would  extend,  for  instance,  to  (a)  the  suggestion  and  con- 
sideration of  improved  methods  and  organisation;  (h)  the  maintenance  of 
works  discipline  and  output;  (c)  the  maintenance  of  a  high  standard  of 
design  and  workmanship;  (d)  the  education  and  training  of  apprentices, 
and  the  conditions  of  entry  into  the  industry  concerned;  (e)  the  demarca- 
tion of  tasks;  (f)  the  prevention  of  unemployment,  the  development  of 
security  of  tenure  in  the  trades  and  the  decasualisation  of  labour;  (g)  ques- 
tions of  wages  and  piece  rates;  (h)  the  prosecution  of  research  and  experi- 
ment, and  (0  the  improving  of  the  public  status  of  the  industry.  Where 
the  Council  represented  a  group  of  allied  trades,  it  would  naturally  con- 
cern itself  with  the  co-ordination  of  their  work  and  the  adjustment  of  their 
respective  interests.  In  addition  to  the  promotion  of  internal  prosperity, 
the  Councils  would  be  able  to  give  public  utterance  to  the  views  and  needs 
of  each  industry  in  its  relation  to  the  whole  national  life.  They  would 
take  account  not  only  of  economic  but  of  moral  and  aesthetic  values.  Their 
object  would  be  not  merely  to  increase  the  productive  efficiency  of  the 
industiy  and  to  reconcile  the  competing  interests  of  those  engaged  in  it, 
but  to  emphasise  the  worth  and  dignity  of  industrial  life  and  to  enlarge 
the  scope  offered  by  it  ta  the  energies  and  ambitions  of  those  concerned. 
It  would  be  part  of  their  task  to  emphasise  the  close  connection  between 
industrial  questions  and  those  relating  to  education  and  social  conditions. 

66 


It  might  even  be  advisable  to  empower  the  Industrial  Councils  to  apply  for 
Board  of  Trade  Orders  giving-  legal  sanction  to  their  decisions — but  this 
would  necessitate  careful  watching,  and  the  provision  of  adequate  safe- 
guards, especially  in  the  interests  of  consumers. 

176.  There  is,  of  course,  a  tendency  in  all  great  associations  of 
industrial  imits  to  develop  the  danger  of  tyranny,  which  seems  almost 
inseparable  from  a  close  corjjoration.  If,  however,  it  is  found  that  the 
requirements  of  the  time  call  for  the  creation  of  such  organisations,  it 
would  be  well  to  face  this  danger  without  flinching.  The  advantages  to 
be  obtained  are  enormous,  and  with  the  help  of  the  legislature  and  the 
Courts  the  dangers  can  be  met. 

177.  Whatever  scheme  is  adopted,  the  essential  thing  is  that  it  shall 
give  expression  to  a  real  desire  for  co-operation  between  Employers  and 
Employed.  In  the  unorganised  trades,  Works  Committees  on  the  plan 
already  suggested  may  be  sufficient  for  present  needs.  The  probability  is 
that,  with  increasing  prosperity  and  better  understanding,  the  desire  for 
organisation  will  grow,  and  the  tendency  will  be  to  extend  the  scope  both 
of  Employers'  and  Labour  Organisations  and  to  increase  their  effectiveness, 
so  as  to  give  the  Employers'  Association  greater  power  to  control  the 
action  of  individual  firms  and  to  enable  the  Trade  Unions  to  make  agree- 
ments with  the  greater  certainty  of  their  being  carried  out.  It  is  evidently 
desirable  that  the  organisation  of  Employers  and  Labour  should  proceed 
pari  passu,  with  full  mutual  recognition,  so  that  individuals  or  small 
groups  on  one  side  should  not  find  themselves  confronted  by  powerful 
organisations  on  the  other.  When  once  a  policy  of  co-operation  has  been 
introduced,  its  future  development  and  extension  may  safely  be  left  to 
time  and  experience.  An  attempt  to  lay  down  any  definite  and  rigid  scheme 
at  the  start  would  probably  defeat  its  own  object.  The  whole  success  of  the 
policy  depends  upon  the  elasticity  with  which  it  can  be  adapted  to  practical 
needs  and  opportunities  as  they  reveal  themselves.  It  is  obvious  that,  even 
in  unorganised  trades,  it  might  be  applied  to  many  questions  of  works 
econoray,  with  the  result  of  stimulating  care  and  efficiency  on  the  part 
of  the  Workers,  and  giving  Management  a  better  understanding  of  their 
point  of  view,  to  the  advantage  of  both.  In  the  engagement  of  men  and 
their  allocation  to  different  departments  and  jobs,  it  should  be  possible  to 
take  advantage  of  the  special  knowledge  of  both  sides,  by  consultation 
between  the  Managers  and  the  representatives  of  the  Works  Staff  as  to  the 
numbers  and  qualities  of  the  men  required.  In  some  cases  it  might  even 
be  possible  to  appoint  a  i)ermanent  joint  committee  to  deal  with  the 
question  of  the  supply  of  labour,  and  the  requirements  of  the  work  in  hand. 

178.  It  is  probable  that  some  time  must  elapse  before  the  benefits  of 
any  such  scheme  as  has  been  suggested  could  be  fully  realised.  The  change 
of  attitude  involved  is  too  vital,  the  field  of  activity  is  too  large  to  hope 
for  any  but  gradual  development.  At  the  outset  it  might  often  happen 
that  much  of  the  discussion,  either  in  a  Works  Committee,  or  a  National 
Industrial  Council,  was  obstructive  or  irrelevant.     But  it  has  been  proved 

67 


again  and  again  that  contact  breeds  mutual  understanding  and  respon- 
sibility calls  forth  capacity.  Without  depreciating  the  part  which  may  be 
played  by  Government  and  by  independent  experts  in  the  regulation  and 
encouragement  of  industry,  the  primary  essential  of  progress  is  that 
Industry  shall  have  faith  in  itself. 

179.  There  is  nothing  to  be  gained  by  minimising  the  practical  dif- 
ficulties. The  task  is  one  wliich  requires  the  co-operation  of  the  best  brains 
engaged  in  the  study  of  industrial  questions,  whether  as  Employers  of 
Labour  Leaders  of  working-class  opinion,  or  Econonaists.  Premature 
action,  based  upon  imperfect  knowledge,  or  an  ill-considered  programme, 
would  only  increase  the  difficulty  of  the  work.  But  with  so  much  to  be 
done  and  such  great  issues  at  stake,  no  time  must  be  lost  in  preparing  the 
ground.  The  inquiries  which  will  be  necessitated  by  the  various  phases  of 
the  Emergency  Problem  will  throw  valuable  light  upon  the  methods  to  be 
adopted  in  the  larger  task.  The  measures  by  which  that  problem  is  dealt 
with  may  be  made  the  foundations  of  permanent  reconstructive  work. 
There  is  a  danger,  however,  lest  the  very  complexity  and  importance  of 
the  questions  of  reinstatement  of  demobilised  men  and  readjustment  of 
industry  to  peace  conditions  should  divert  attention  from  the  fundamental 
issues.  It  is  essential  that  we  should  see  the  Industrial  Problem  as  a  whole, 
and  should  preserve  a  clear  idea  of  the  relation  between  its  several  factors 
and  the  proportionate  weight  to  be  attached  to  each. 

180.  It  is  the  hope  of  those  responsible  for  this  Memorandum  that  the 
suggestions  here  put  forward  may  prove  of  some  assistance  in  attaining 
this  central  standpoint.  They  have  attempted  to  trace  the  causes  of  that 
unrest  by  which  industrial  troubles  have  been  produced  in  the  past,  and 
by  which  the  economic  dangers  arising  from  the  war  are  likely  to  be  accen- 
tuated. Prom  this  analysis  certain  broad  principles  have  been  deduced, 
and  the  general  lines  of  their  application  indicated.  There  are  many 
aspects  of  the  problem  which  have  not  been  dealt  with,  or  have  only  very 
briefly  been  touched  upon  in  these  pages.  The  details  of  a  practical  pro- 
gramme require  must  careful  study  and  experiment.  But  whatever  form 
the  new  developments  may  take,  the  essential  preliminary  is  the  adoption 
of  a  new  attitude  with  regard  to  Industry,  the  recognition  of  national 
responsibility  for  industrial  conditions,  the  recognition  of  the  joint  respon- 
sibility towards  the  nation  borne  by  those  who  are  engaged,  whether  as 
Employers  or  Employed,  in  its  activities.  To  hold  the  balance  true  between 
the  economic  and  the  hum/an  side  of  the  problem;  to  increase  at  once  the 
extent  and  quality  of  output ;  to  make  the  work  of  each  man,  in  any  posi- 
tion, an  integral  and  worthy  part  of  his  life  as  a  citizen;  this  is  a  task 
as  trialy  national  as  that  of  victory  in  war.  The  unparalleled  and 
undreamt  of  expansion  of  our  military  strength  which  has  been  called 
forth  by  the  European  struggle,  may  give  us  the  measure  of  our  capacity 
to  meet  the  requirements  of  peace. 


68 


Appendix  A. 

A  Suggested  Experiment 

The  following  scheme  for  an  experiment  in  industrial  reconstruction, 
as  applied  to  the  working  of  the  Post  Office,  is  iaken  from  a  paper  on  "The 
Control  of  Industry  after  the  War,"  read  hy  Mr.  A.  E.  Zimmern,  M.A.,  at 
the  Conference  of  Working-Class  Associations  held  in  Oxford,  on  July  21st, 
22nd  and  2Srd,  1916.  The  authors  of  the  Memorandum  do  not  identify 
themselves  with  the  suggestions  made,  hut  have  thought  it  well  to  print 
the  scheme  as  a  concrete  example  of  one  way  in  which  the  principles  dis- 
cussed in  the  Memorandum  could  he  experimentally  applied.  It  would  he 
of  great  value  as  a  hasis  for  inquiry  and  discussion  if  similar  schemes, 
applicable  to  the  leading  staple  industries,  could  he  worked  out  hy  represen- 
tatives of  the  trades  concerned. 

English  people  are  in  the  habit  of  believing  that  ideas  are  "all  very- 
well  in  theory,"  but  will  never  work  in  practice.  The  reason  why  ideas 
which  are  theoretically  sound  do  not  work  out  in  practice  is  generally 
because  they  are  applied  without  sufficient  consideration  of  the  conditions 
of  the  particular  case,  or  because  those  who  are  entrusted  with  the  task 
of  carrying  them  out  are  not  in  sympathy  with  them.  It  is  clear  that  not 
all  the  British  industries  are  ripe  for  changes  in  the  direction  of  demo- 
cratic control.  There  are  a  number  of  previous  conditions  which  it  would 
be  well  to  satisfy  if  an  experiment  is  to  have  a  good  chance  of  success.  I 
think  we  may  broadly  law  down  seven  conditions  which  the  business  or 
industry  we  are  looking  for  should  satisfy: — 

1.  It  should  be  a  nationalised  industry* — that  is  to  say,  an  industry 
which  is  recognised  to  be  a  public  service  and  a  permanent  part  of  the 
national  life.  Such  an  industry  is  at  once  removed  from  the  atmos- 
phere of  commercialism  and  immune  from  the  dangers,  if  also  from  the 
stimulus,  of  competition  and  to  liability  from  sudden  changes  on  the  side 
of  demand.  It  would  be  possible,  of  course,  to  choose  a  municipalised  indus- 
try, but  a  nationalised  industry  is  more  likely  to  yield  the  broad  outlook 
required  on  both  sides. 

2.  It  should  be  an  industry  where  the  amount  of  labour  employed  is 
relatively  large  compared  with  the  fixed  capital  invested,  and  where  pros- 
perity, therefore,  depends  principally  upon  the  efficiency  of  the  workers. 
Such  an  industry  abviously  affords  a  better  ground  for  experiments  in 
labour  management. 

On  the  labour  side  it  should  be  an  industry  where  the  workers  are: 

♦It  should  be  pointed  out  that  Arr.  Zimmern's  paper  did  not  discuss  the  question 
of  nationalisation  oi  industries,  except  in  so  far  as  tlie  Post  Office  organisation  offered 
a  specially   suitable  field   iov  a  first  experiment  in   reconstruction. 

69 


3.  Highly  skilled; 

4.  Have  a  relatively  high  standard  of  general  education  and 
intelligence. 

5.  Have  a  high  general  level  of  personal  character. 

6.  Where  Trade  Unionism  is  well  organised  both  as  regards  numbers 
and  spirit  and  has  been  afforded  recognition  by  the  employing  authority. 

7.  Where  there  are  no  serious  demarcation  difficulties  between  the 
various  Trade  Unions  concerned. 

In  the  case  which  I  propose  to  submit  for  experirhent,  the  case  of  the 
Post  Office,  all  these  conditions  would  seem  to  be  fulfilled. 

1.  It  is  a  nationalised  service. 

2.  The  labour  force— 253,750  in  all,  or  230,000  on  the  manipulative 
side — is  relatively  large  compared  with  the  fixed  capital. 

3.  The  work  is  for  the  most  part  highly  skilled,  as  it  indicated  by  the 
fact  that — 

4.  The  great  majority  of  postal  workers  have  to  pass  a  general  exam- 
ination at  the  age  of  16  or  over. 

5.  The  morale  of  the  service  is  uncommonly  good.  In  spite  of  obvious 
temptations,  the  number  of  dismissals  from  the  service  is  negligible.  The 
average  annual  percentage  of  dismissals  in  the  manipulative  branch  of  the 
service  is  0.25  per  cent. 

6.  Trade  Unionism  is  powerful  and  well  organised  in  spite  of  the  large 
number  of  girls  employed.     Practically  all  the  m^n  are  organised. 

7.  The  unions  concerned  are  on  good  terms  with  one  another  and  are 
organised  for  common  action  in  a  National  Joint  Committee. 

How  is  the  work  of  the  Post  OfiUce  at  present  organised  ?  There  is,  as 
already  mentioned,  a  broad  division  of  the  employees  between  what  is  called 
the  clerical  staff  and  the  manipulative  staff.  With  the  clerical  staff,  which 
has  organisations  of  its  own,  I  do  not  propose  to  deal  in  what  follows.  I 
shall  confine  myself  to  the  manipulative  staff,  consisting  principally  of  post- 
men, sorters,  telegraphists,  telephonists,  and  engineering  grades,  who  are 
represented  on  the  National  Joint  Committee  of  Post  Office  Associations. 
That  Committee  consists  of  the  following  organisations : — 


Name  of 
Association 

Class  or  Classes 
Represented 

Official 
Establish- 
ment of 
Classes. 

Membership 

of 
Association. 

Postmen's    Federation.. 

Postal     and     Telegraph 
Clerks'    Association. . 

Pawcett    Association.  .  . 

Engineering     &     Stores 
Association       f  Postal, 
Telegraph    and    Tele- 
phone) 

National    Federation    of 
Sub-Postmasters    .... 

Postmen,   assistant  and   auxiliary 

postmen 
Telegraphists,   counter   clerks   and 

telegraphists,  sorting  clerks  and 

telegraphists,    telephonists,    and 

learners 
Sorters,   London   Postal   Service.  . 
Skilled    and     unskilled     workmen, 

etc.,  in  Engineering  and   Stores 

Department 

Scale  payment  sub-postmasters   . . 

68,000 
35,000 

7,021 

13,000 

22,658 

51,500 
22,000 

6,430 

7,000 

9,400 

70 


Let  us  now  turn  to  the  organisation  of  the  management  side.  The 
control  of  the  Post  Office  is  vested,  subject  to  the  supremacy  of  the  Cabinet 
and  of  Parliament,  in  the  Postmaster-General  and  his  i)ermanent  Secretary, 
known  as  the  Secretary  of  the  Post  Office.  The  control  of  the  service  thus 
centres  in  the  Secretary's  office  at  St.  Martin's-le-Grand.  The  work  of  the 
Secretary's  office  is  carried  on  ynder  his  supervision  in  five  departments, 
dealing  respectively  with  questions  of  establishment,  staff,  buildings  and 
equipment,  organisation  (i.e.,  mails,  train  services,  collection  of  letters, 
etc.),  and  engineering.  There  are  also  Secretaries  for  Scotland  and  Ire- 
land, who  exercise  a  general  control  over  the  staif  in  those  countries,  subject, 
however,  to  the  control  of  the  Secretary's  department  in  London.  All 
dismissals,  for  instance,  must  be  referred  to  London. 

As  regards  local  administration,  the  country  is  divided  into  l-t  dis- 
tricts, each  of  which  is  in  charge  of  an  official  called  the  Surveyor.  Sur- 
veyors are  allowed  fairly  wide  powers  of  organisation  and  control,  subject, 
however,  in  the  case  of  the  staif  to  the  right  of  appeal  to  the  Secretary  in 
London  in  all  cases  affecting  either  individual  or  a  group  of  individuals. 

Below  the  Surveyors  are  the  Postmasters.  In  every  Surveyor's  district 
there  are  a  number  of  Postmasters  responsible  for  the  business  of  the  head 
office  and  certain  sub-offices.  Postmasters  are  given  a  fairly  free  hand 
in  matters  of  organisation,  but  in  the  more  important  matters  affecting 
their  subordinates  they  are  required  to  obtain  the  Surveyor's  sanction. 

Let  us  now  turn  to  the  question  of  the  relation  between  the  governing 
authorities  and  the  staff,  so  far  as  staff  conditions  are  concerned.  Those 
conditions  are  laid  down  in  a  series  of  regulations  which  may  be  sum- 
m.arised  as  follows :  The  associations  of  postal  employees  have  been  accorded 
recognition  by  the  Post  Office  authorities;  that  is,  they  are  recognised  as 
having  the  right  to  represent  the  interests  of  individual  workers  or  groups 
of  workers.  The  conditions  mider  which  this  right  may  be  exercised  are 
carefully  defined  by  the  authorities.  The  general  procedure  is  for  the 
central  office  of  the  association  concerned  to  submit  a  memorial  on  the  point 
at  issue  to  the  Secretary  or  to  the  Postmaster-General.  Such  memorials 
are  invariably  acknowledged,  and  it  is  possible  for  the  representatives  of 
the  association  to  meet  the  authorities  at  periodical  intervals  to  discuss 
m:atters  already  submitted  in  writing.  The  matters  on  which  the  associa- 
tions are  free  to  submit  memorials  are  defined  as  "general  questions  relat- 
ing to  the  conditions  at  work,  i.e.,  wages,  hours  of  duty,  leave,  meal  reliefs, 
etc."  Memorials  on  local  questions  and  on  individual  questions  other  than 
those  affecting  discipline  or  the  conduct  of  supervising  officers  have  to  be 
submitted  in  the  first  instance  by  the  local  branch  of  the  association  con- 
cerned to  the  local  responsible  official  (i.e.,  the  Postmaster  or  Surveyor). 
The  local  official  first  deals  with  representations,  and,  failing  satisfaction, 
the  association  is  at  liberty  to  carry  the  matter  further  to  headquarters  and 
obtain  a  reply.  Xo  memorials  are  allowed  to  be  submitted  on  questions 
relative  to  promotion.     The  liberty  of  action  of  the  associations  is  also 

71 


limited  in  the  case  of  qviestions  of  discipline.     The  provision  in  this  con- 
nection is  sufficiently  important  to  be  quoted  in  full : — 

^'Memorials  respecting  disciplinary  measures  that  have  been  taken 
against  individual  officers  may  be  submitted  to  the  Secretary  or  the  Post- 
master-General by  the  central  body  of  the  association  in  serious  cases, 
where  appeals  by  the  individuals,  made  first  to  the  local  authorities  and  then 
to  the  Secretary  or  Postmaster-General,  have  not  been  successful,  and  where 
the  central  body  have  satisfied  themselves  by  a  full  investigation  of  the 
circumstances  that  they  can  present  new  facts  or  considerations  which 
render  further  review  desirable." 

It  will  thus  be  seen  that  the  Trade  Unions  are  put  in  the  position  of  a 
sort  of  permanent  and  official  opposition.  Their  function  is  not  to  co-oper- 
ate with  the  management,  but  to  criticise,  not  to  prevent  complaints,  but  to 
endeavour  to  remedy  them;  and  in  certain  cases,  such  as  discipline,  where 
feeling  is  likely  to  run  highest,  they  are  precluded  from  interfering  till 
the  matter  has  already  been  declared  upon  by  the  Secretary  and  has  become 
the  subject  of  serious  and  probably  bitter  controversy. 

How  can  this  system  of  management  be  modified  in  the  direction  out- 
lined^ An  attempt  will  be  made  in  the  following  remarks  to  suggest  how 
this  might  be  done.  The  object  of  the  reforms  suggested  is  not  to  revolu- 
tionise the  organisation  of  the  postal  service  or  to  turn  the  Department 
upside  down;  it  is  to  take  the  existing  organisation  as  it  stands  and  to 
make  the  least  possible  change  compatible  with  granting  to  the  staff  that 
measure  of  responsibility  which  is  increasingly  felt  to  be  necessary  in  order 
to  secure  the  efficiency  and  harmony  of  the  service.  I  am  indebted  in  what 
follows  to  my  friend,  Mr.  J.  G.  Newlove,  a  distinguished  ex-student  of 
Ruskin  College  and  now  General  Secretary  of  the  Postal  and  Telegraph 
Clerks'  Association,  who  has  given  much  time  and  thought  to  the  improve- 
ment of  the  service  with  which  he  is  connected,  and  is  willing  to  accept 
full  responsibility  for  the  constructive  side  of  this  paper. 

The  first  suggested  change  is  that  machinery  shall  be  set  up  which  will 
give  the  central  bodies  of  the  association  representation  on  a  committee  of 
each  branch  of  the  Secretary's  office.  Wliere  the  interests  of  each  grade 
are  peculiar,  as  in  the  establishment  branch,  there  should  be  a  representa- 
tive of  each  grade;  where  their  interests  are  identical,  as  on  building 
qustions,  less  would  suffice. 

Similar  machinery  shoidd  be  set  up  in  each  Surveyor's  district. 
Advisory  Committees  should  be  formed  to  discuss  with  the  Surveyor  ques- 
tions of  policy  affecting  his  district,  and  these  committees  should  contain 
a  representative  of  each  grade  to  co-operate  with  the  Surveyor's  staff. 

Passing  down  to  the  individual  office — what  corresponds  in  other  indus- 
tries to  the  "workshop" — it  should  be  one  of  the  duties  of  the  Postmaster 
to  consult  with  representatives  of  the  staff  on  all  questions  affecting  the 
particular  office.  This  should  extend  to  all  questions  without  exception, 
which  affect  the  office  as  a  whole,  for  all  such  questions  must  in  some 

72 


way  reflect  on  the  organisation  of  the  office.     Even  a   matter  like   com- 
plaints from  the  public  can  be  traced  back  to  office  organisation. 

A  difficulty  arises  at  this  point  as  to  the  procedure  in  very  small  offices. 
The  associations  find  by  experience  that  it  is  often  difficult  in  such  offices 
to  find  a  local  secretary  who  is  sufficiently  well  trained  to  deal  with  ques- 
tions of  policy.  Yet  it  is  just  in  such  small  offices  that  precedents  distaste- 
ful to  the  staff  are  apt  to  be  created.  Such  offices,  therefore,  require  special 
treatment,  and  it  is  suggested  that  a  representative  of  the  Executive  of  the 
associations  should  be  able,  if  necessaiy,  to  act  as  a  medium  of  advice  for 
the  smaller  offices.  It  might  prove  desirable  in  this  connection  to  rearrange 
the  boundaries  of  the  associations'  districts  so  as  to  harmonise  them  with 
the  Surveyor's  districts. 

This  procedure  is  in  itself  no  great  innovation.  Many  Postmasters  do 
already  adopt  means  of  consultation  with  their  staff,  and  are  indeed  defi- 
nitely encouraged  to  do  so  by  the  rules  of  the  Department.  The  new 
arrangement  will  merely  serve  to  regularise  this  and  to  level  up  the  pro- 
cedure in  the  various  offices.  It  is  not  suggested  that  the  new  committees 
shall  have  a  deciding  voice.  Where  no  agreement  can  be  reached  in  them 
the  decision  must  continue  to  rest,  as  now,  with  the  supervising  authorities. 
If  on  matters  of  importance  a  policy  were  to  be  adopted  contrary  to  the 
wishes  of  the  associations  it  would  always  be  possible  to  them  to  reopen  the 
matter  through  their  annual  conference  and  to  approach  the  Postmaster- 
General  as  at  present.  But  the  criticism  which  they  would  then  bring  to 
bear  would  be  bred  of  inside  knowledge,  and  it  would  of  necessity  be 
constructive  rather  than  critical  in  tone. 

This  change  of  spirit  would  be  likely  to  apply  in  special  degree  to 
questions  of  fuiancial  iwlicy.  One  of  the  chief  functions  of  the  new  central 
machinery  would  be  to  discuss  questions  involving  expenditure,  and  in 
particular  questions  of  wages  or  salaries.  The  procedure  at  present  in  this 
connection  is  not  satisfactory.  No  scheme  involving  fresh  expenditure  can 
be  adopted  until  it  has  been  approved  by  the  Treasury.  The  present  method 
of  dealing  with  such  schemes  is  to  refer  them  to  a  Parliamentary  Com- 
mittee of  Inquiry.  The  members  of  such  Committees'  are  necessarily  not 
conversant  with  the  whole  inner  working  of  a  huge  organisation  like  the 
Post  Office,  and  are,  therefore,  unable  to  form  a  judgment  at  first  hand  on 
the  problems  submitted  to  them  for  decision.  They  must  inevitably  rely 
for  their  special  knowledge  upon  the  high  officials  of  the  Department. 
This,  it  will  be  seen,  naturally  tends  to  place  those  at  present  responsible 
for  the  policy  of  the  Department  in  a  preferential  position  as  compared 
with  the  representatives  of  the  staff.  As  under  existing  conditions  the 
Department  is  bound  to  consider  the  interests  of  the  taxpayer,  its  natural 
role  is  that  of  opposition  to  increases  in  pay.  This  is  intensified  by  the 
fact  that  the  Post  Office  is  run  at  a  considerable  profit,  amounting  to  no 
less  than  £6,000,000  in  the  last  year  before  the  war,  and  that  there  is  a 
tendency  to  adopt  purely  commercial  standards  of  successful  administra- 
tion.    If  the  procedure  by  Parliamentary  Committee  were  abandoned  and 

72, 


questions  of  wages  and  conditions  were  threshed  out  on  the  proposed  central 
committees  before  being  submitted  to  a  Parliamentary  body  for  ratifica- 
tion, or  final  decision  in  cases  of  disagreement,  the  arrangement  would 
work  more  fairly  for  all  parties  concerned,  including  the  Treasury.  The 
elimination  of  friction  and  the  consequent  increase  of  esprit  de  corps 
should  go  further  towards  true  efficiency  and  economy  than  the  existing 
methods,  lending  themselves,  as  unequal  contests  always  do,  to  undesirable 
and  often  unpleasant  methods  of  influence  and  agitation.  It  it  were  found 
possible  not  to  pay  the  profits  of  the  Post  Office  into  the  ordinary  revenue, 
but  to  earmark  them  for  special  purposes  of  social  usefulness,  in  the  choice 
of  which  the  associations  might  have  a  voice,  this  would  remove  any  feeling 
on  the  part  of  the  staff  that  they  were  being  "exploited"  in  a  commercial 
spirit,  and  would  act  as  a  strong  incentive  to  use  every  effort  to  improve 
the  service. 

This  brings  us  to  the  functions  of  the  central  and  local  committees. 
The  most  important  and  difficult  of  these  would  be  the  discussion  of  ques- 
tions of  discipline.  Discipline  is  really  the  crux  of  the  whole  change  of 
method  and  spirit  proposed.  The  existing  rule,  which  forbids  the  associa- 
tions to  interfere  except  after  judgment  has  already  been  passed  both 
locally  and  at  the  centre,  is  based  on  the  root  principle  of  the  old  system, 
that  power  is  exercised  from  above  and  that  the  prestige  of  the  ruling 
authority  must  not  be  infringed.  It  is  also  based  upon  reasons  of  practical 
convenience  in  that  most  men  extremely  dislike  the  responsibility  of  sitting 
in  judgment  on  their  companions  and  workmates.  If  the  associations  are 
to  receive  the  right  of  co-operating  with  the  supervisory  staff  in  dealing 
with  cases  of  discipline  they  will  be  assuming  responsibility  for  giving  what 
must  sometimes  be  very  unpleasant  decisions  against  their  members.  But 
because  a  thing  is  unpleasant  there  is  no  reason  for  not  facing  it.  Democ- 
racy involves  the  extension  of  responsibility  in  things  pleasant  and  unpleas- 
ant alike.  If  the  associations  were  ready  to  deal  with  jjay,  but  shirked  deal- 
ing with  punishment,  they  would  be  false  to  their  principles.  Fortunately, 
the  number  of  serious  cases  which  arise  in  the  service  is  extremely  small, 
but  these  are  just  the  cases  which  the  associations  ought  to  deal  with.  The 
best  arrangement  would  seem  to  be  to  leave  minor  breaches  of  discipline 
to  be  dealt  with  as  at  present  by  the  individual  Postmaster,  but  that  serious 
cases  referred  by  hiin  to  the  Surveyor  should  be  dealt  with  by  the  Sur- 
veyor's Committee,  where  the  representatives  of  the  association  would  be 
less  subject  than  on  the  local  committee  to  the  bias  of  personal  feeling. 
Matters  dealt  with  by  the  Postmaster  would  be  brought  before  the  associa- 
tion through  the  local  committee  if  it  were  found  necessary. 

Questions  of  recommendation  for  promotion  should  also  be  dealt  with 
by  the  Surveyor's  Conmiittee.  Promotion  and  discipline  really  hang  closely 
together;  both  involve  difficult  decisions  and  the  danger  of  heart-burning. 
But  there  seems  no  way  out  except  through  the  extension  of  the  principle 
of  responsibility. 

74 


As  regards  the  rest  of  the  committee's  work,  it  can  be  summed  up 
under  the  general  heading  of  "conditions" — hours,  leave,  meal  reliefs, 
improvements  in  office  equipment,  etc.  Most  questions  of  this  kind  would 
be  settled  locally.  Only  questions  of  principle  would  be  referred  to  the 
central  committee  for  decision. 

Such,  in  brief  outline,  is  the  way  in  which  the  principle  of  democratic 
control  might  be  introduced  into  the  largest  single  business  in  the  country. 
The  changes  suggested  may  seem  modest  in  scope,  but  they  would  be  far- 
reaching  in  effect.  The  Postmaster-General  who  had  imagination  enough 
to  adopt  a  scheme  of  this  nature  would  be  conferring  a  benefit  alike  on 

« 

the  postal  workers,  the  Labour  movement,  and  the  whole  nation.  To  the 
postal  workers  the  change  would  bring  a  new  sense  of  dignity  and  self- 
respect  and  satisfaction  in  their  work,  and,  more  important  perhaps  even 
than  these,  it  would  leave  them  free  to  exercise  their  citizen  rights  as 
pure  citizens  without  the  constant  temptation  to  use  political  influence  as  a 
means  for  remedjdng  grievances  arising  out  of  their  employment  under 
Government.  It  would  thus  be  a  charter  not  only  of  economic,  but  of 
political  emancipation.  To  the  Labour  movement  it  would  be  an  example 
and  an  inspiration  to  apply  the  same  principle  of  responsible  democracy 
to  the  far  more  difficult  problems  of  private  employment  which  still  lie 
unsolved  before  it.  To  the  community  it  would  mean  a-  transformation 
in  the  spirit  of  one  of  the  chief  of  those  public  services  on  the  efficiency 
of  which  we  shall  be  so  much  dependent  in  the  work  of  national  recon- 
struction after  the  war.  A  keen,  willing,  and  enterprising  Post  Office  can 
be  of  far  more  service  to  us  than  we  realise  at  present.  But  most  of  all, 
the  community  will  benefit  from  the  knowledge  that  the  qualities  of  mind 
and  character  necessary  to  the  working  of  self-governing  institutions  are 
not  confined  to  any  one  class  or  section,  that  democracy  is  a  plant  which, 
properly  tended  and  safeguarded,  can  grow  and  prosper  in  other  than  its 
familiar  soil,  and  that  our  country,  which  has  led  the  world  in  the  insti- 
tutions of  policies  and  government,  is  ready  and  eager  to  apply  the  same 
enduring  principles  to  wider  fields  of  public  business. 


75 


CALIFORNIA, 
LIBRARY, 

iX>S  ANGELES.  CALIF. 


iir  cm  iTurpii  or'' 


AA    000  561  511 


7 


-f  ■ 


.  .,-'*^ 


\ 


-•rr  -4*^ 


■  s-'-^. 


-fy 


